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C o p y r i g h t 2 0 1 5 . B u s i n e s s S c i e n c e R e f e r e n c e . A l l r i g h t s r e s e r v e d . M a y n o t b e r e p r o d u c e d i n a n y f o r m w i t h o u t p e r m i s s i o n f r o m t h e p u b l i s h e r , e x c e p t f a i r u s e s p e r m i t t e d u n d e r U . S . o r a p p l i c a b l e c o p y r i g h t l a w .

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Business Ethics and Diversity in the Modern Workplace

Philippe W. Zgheib Lebanese American University, Lebanon

A volume in the Advances in Human Resources Management and Organizational Development (AHRMOD) Book Series

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Published in the United States of America by Business Science Reference (an imprint of IGI Global) 701 E. Chocolate Avenue Hershey PA, USA 17033 Tel: 717-533-8845 Fax: 717-533-8661 E-mail: [email protected] Web site: http://www.igi-global.com

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Zgheib, Philippe, 1957- Business ethics and diversity in the modern workplace / by Philippe Zgheib. pages cm Includes bibliographical references and index. Summary: “This book investigates the ethical frameworks within modern corporations and their impact on the communities they serve, focusing on autonomous decision making in complex quandaries”-- Provided by publisher. ISBN 978-1-4666-7254-3 (hardcover : alk. paper) -- ISBN 978-1-4666-7255-0 (ebook) -- ISBN 978-1-4666-7257-4 (print & perpetual access) 1. Business ethics. 2. Social responsibility of business. I. Title. HF5387.Z44 2015 174’.4--dc23 2014036394 This book is published in the IGI Global book series Advances in Human Resources Management and Organizational Devel- opment (AHRMOD) (ISSN: 2327-3372; eISSN: 2327-3380)

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The Advances in Human Resources Management and Organizational Development (AHRMOD) Book Series (ISSN 2327-3372) is published by IGI Global, 701 E. Chocolate Avenue, Hershey, PA 17033-1240, USA, www.igi-global.com. This series is composed of titles available for purchase individually; each title is edited to be contextually exclusive from any other title within the series. For pricing and ordering informa- tion please visit http://www.igi-global.com/book-series/advances-human-resources-management-organizational/73670. Postmaster: Send all address changes to above address. Copyright © 2015 IGI Global. All rights, including translation in other languages reserved by the publisher. No part of this series may be reproduced or used in any form or by any means – graphics, electronic, or mechanical, including photocopying, recording, taping, or information and retrieval systems – without written permission from the publisher, except for non commercial, educational use, including classroom teaching purposes. The views expressed in this series are those of the authors, but not necessarily of IGI Global.

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• Job Enrichment • Organizational Development • Human Relations Movement • Employee Benefits • Compliance • Talent Identification and Management • Workplace Culture • Process Improvement • Change Management • Training and Development

Coverage

A solid foundation is essential to the development and success of any organization and can be accom- plished through the effective and careful management of an organization’s human capital. Research in human resources management and organizational development is necessary in providing business leaders with the tools and methodologies which will assist in the development and maintenance of their organizational structure.

The Advances in Human Resources Management and Organizational Development (AHRMOD) Book Series aims to publish the latest research on all aspects of human resources as well as the latest methodologies, tools, and theories regarding organizational development and sustainability. The AHR- MOD Book Series intends to provide business professionals, managers, researchers, and students with the necessary resources to effectively develop and implement organizational strategies.

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Patricia Ordóñez de Pablos Universidad de Oviedo, Spain

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Organizational Innovation and IT Governance in Emerging Economies Jingyuan Zhao (University of Toronto, Canada) Patricia Ordóñez de Pablos (Universidad de Oviedo, Spain) and Robert D. Tennyson (University of Minnesota, USA) Business Science Reference • copyright 2015 • 304pp • H/C (ISBN: 9781466673328) • US $205.00 (our price)

Utilizing Evidence-Based Lessons Learned for Enhanced Organizational Innovation and Change Susan McIntyre (Defence Research and Development, Canada) Kimiz Dalkir (McGill University, Canada) Perry Paul (Lessons Learned Consultant, Canadian Armed Forces (Retired), Canada) and Irene C. Kitimbo (McGill University, Canada) Business Science Reference • copyright 2015 • 323pp • H/C (ISBN: 9781466664531) • US $195.00 (our price)

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Perspectives on Theory U Insights from the Field Olen Gunnlaugson (Université Laval, Canada) Charles Baron (Université Laval, Canada) and Mario Cayer (Uni- versité Laval, Canada) Business Science Reference • copyright 2014 • 307pp • H/C (ISBN: 9781466647930) • US $185.00 (our price)

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Table of Contents

Foreword.............................................................................................................................................xiii

Preface.................................................................................................................................................. xv

Acknowledgment..............................................................................................................................xxiii

Introduction...................................................................................................................................... xxiv

Section 1 Macro Ethics of Social Welfare

Chapter 1 EthicsPerception:LearningandTeachingofEthics.............................................................................. 1

Chapter 2 Utility,Duty,Morality,andJustice....................................................................................................... 16

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Chapter 3 AbuseofPower..................................................................................................................................... 24

Chapter 4 SexualHarassmentLawsandTheirImpactontheWorkEnvironment............................................... 41

INTRODUCTION...........................................................................................................................................................41 BACKGROUND..............................................................................................................................................................41 SEXUALHARASSMENTINTHEHEALTHSECTOR...............................................................................................42 SEXUALHARASSMENTATWORKWORLDWIDE:STATISTICSFROMTHEU.S.............................................43 SEXUALHARASSMENTATWORK:STATISTICSINCANADA............................................................................43 SPECIFICBACKGROUND............................................................................................................................................43 INTRODUCTIONTOSEXUALHARASSMENTLAWS.............................................................................................44 IMPACTOFISSUINGSEXUALHARASSMENTLAWSONTHEWORKENVIRONMENT................................45 DRAWBACKSOFSEXUALHARASSMENTLAWS..................................................................................................46 SEXUALHARASSMENTBACKGROUND/HISTORYINLEBANON......................................................................47 THECASEOFONEAUTOMANUFACTURINGBUSINESS....................................................................................49 CONCRETEEXAMPLEORCASE...............................................................................................................................49 CONTRASTBETWEENCONTEXTSANDREGULATIONS....................................................................................49 SOLUTIONSONHOWTOAVOIDTHENEGATIVEANDPROMOTETHEPOSITIVE........................................50 SEXUALHARASSMENTDILEMMA:TRUTHVS.LOYALTY................................................................................51 CASE:SEXUALHARASSMENT..................................................................................................................................54 ACTUALRESOLUTION................................................................................................................................................56 PROPOSEDRESOLUTION...........................................................................................................................................57 LESSONSLEARNED.....................................................................................................................................................58 OPINION.........................................................................................................................................................................59 FUTURETRENDS.........................................................................................................................................................59 CONCLUSION................................................................................................................................................................60

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Chapter 5 MonopolyAbuse................................................................................................................................... 66

Chapter 6 TheEthicsofSocialMediaandNetworkSecurity:IssuesintheWorkplace....................................... 79

Chapter 7 EnvironmentalPollution....................................................................................................................... 91

Chapter 8 ClimateChange:GlobalWarmingMitigationorAdaptation............................................................. 100

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Chapter 9 TaxEvasion......................................................................................................................................... 110

Chapter 10 MediaBias.......................................................................................................................................... 118

Section 2 Corporate Business Ethics

Chapter 11 CorporateSocialResponsibility......................................................................................................... 132

Chapter 12 NepotisminaFamilyBusiness........................................................................................................... 142

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ISNEPOTISMRELATEDTOSOCIALCULTURE?.................................................................................................146 WHENNEPOTISMPAYSINSTEADOFHARDWORK..........................................................................................146 FUTURETRENDS.......................................................................................................................................................147 CONCLUSION..............................................................................................................................................................147

Chapter 13 WhistleBlowing................................................................................................................................. 152

Chapter 14 ToxicWasteDisposal.......................................................................................................................... 162

Chapter 15 AdvertisingDeceit:ManipulationofInformation,FalseAdvertising,andPromotion...................... 177

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Chapter 16 Plagiarism........................................................................................................................................... 190

Chapter 17 BriberyandCorruption....................................................................................................................... 196

Chapter 18 PiracyofIntellectualPropertyRightsandCopyrightInfringement................................................... 211

Chapter 19 EthicalYielding.................................................................................................................................. 229

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Chapter 20 FinancialFraud:Embezzlement,PonziSchemes,andCreditFraud.................................................. 238

Chapter 21 ChildLabor......................................................................................................................................... 250

Section 3 Country Applications and Case Studies

Chapter 22 OrganSelling:WhenItBecomesaBusiness...................................................................................... 268

Chapter 23 RealEstateValuationFraud................................................................................................................ 278

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Chapter 24 IllegalDrugsinLebanon:RecreationalorMedicinal…WhoIstheVictim?..................................... 292

Compilation of References............................................................................................................... 306

About the Author.............................................................................................................................. 323

Index................................................................................................................................................... 324

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xiii

Foreword

Business ethics is a perennially controversial topic: Should it be a required course for business students? Can ethical behavior be taught at all? Perhaps more fundamentally, what is business ethics? Does it exist at all, or is it an oxymoron, like “jumbo shrimp” or “military intelligence”?

Since business ethics is a largely normative discipline, asking what decisions we should make in difficult situations in our work lives, it is open to a great amount of disagreement and controversy. Ethical decision-making is grounded in and conditioned by the contexts we find ourselves in, includ- ing economic and organizational ones, but it is also guided by our philosophical beliefs concerning what we owe others in society to whom we are not directly connected. Since these differ widely from person to person, and even from society to society, there are bound to be important disagreements concerning what is acceptable in commercial life.

On the other hand, there is widespread agreement that certain things are detrimental to society as a whole and ought to be fought as much as possible. These include business and governmental corruption, environmental degradation caused by industrial activity, exploiting vulnerable popula- tions through fraud or force in order to make a profit, and sexual, racial, religious, and other forms of group-based harassment in the workplace. While there may be disagreement on the larger philosophi- cal level as to what ethical theory should govern human life, there is a great deal of agreement that certain things are harmful or even shameful, and that, on the practical level at least, decent human beings shouldn’t do them.

It may be best then to view business ethics as a discipline that explores the connection between these wrong or harmful activities on which there is widespread agreement and the decisions made by individuals that lead to them. The dominant ethical philosophies of utilitarianism, deontological (Kantian) ethics, virtue ethics, and even the major religious traditions all have an important influence on how we think about ethical dilemmas and problems in the workplace, and no business ethicist or philosopher can offer definitive proof that one theoretical viewpoint has an exclusive right to govern human action. Good business ethics teaching instead guides students through ethically problematic situations to explore: firstly, why we feel something is wrong, and secondly, what sort of decisions we think might lead to ethically better outcomes.

It is in this spirit that Professor Philippe Zgheib has written Business Ethics and Diversity in the Modern Workplace. Professor Zgheib’s book covers a broad array of issues in contemporary business ethics, from environmental ethics to corporate social responsibility to financial fraud, concluding with an examination of topics of special concern to his home country, Lebanon. His contribution to the business ethics literature draws on a wide range of sources, including the literary, philosophical, and journalistic, as well as the more standard business ethics and management literature. He illuminates

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many of the most pressing issues that leaders in business, government, and academia are grappling with in this time of economic uncertainty and fundamental social change, particularly for the students who will soon be graduating from university classrooms to the “real world” of work and the task of building successful lives in very challenging social conditions.

Steven McNamara The American University of Beirut, Lebanon

Steven McNamara is a business law professor and an international entrepreneur. His business expertise spans many years of practice of business law in the USA, and many more in academic business law and business ethics. He is currently serving as assistant professor of business law and business ethics at the Olayan School of Business in the American University of Beirut. He holds a PhD in Business Law from Boston College, and a professional postgraduate professional certification from Columbia University. His latest business research interests include moral intuition in the structure of insider trading law, informational failures in structured finance, and legal aspects of international entrepreneurial initiatives.

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Preface

OVERVIEW OF BUSINESS ETHICS

Thesocialresponsibilityofbusinessistomaximizeitsprofits.Underwhatconstraints?Whatinitial conditions?Whatboundarylimitations?

Iftheobjectivefunctionofbusinessisprofitmaximization,thenbusinessethicsprovidestheframework ofvalidityofbusinesspractice.Ancientphilosophy,aswellasmoderndeontology,providessufficient lightontheethicalissuesfacingourmodernworldtoprovidehumansocietieswiththeiroptimalwelfare.

Yet,businessexcessesdrawlavishlyonimmoralityandonunfairnessinpursuitofhappiness,ofexcel- lence,andofsuccess.Today’sbodyofscientificknowledgeisadvancedenoughthateverydaybusiness decisionscansettleon-goingdilemmasinfullknowledgeofconsequences,ofcosts,andofbenefits.

Thisbookaimsatdissectingonebyone,asmanyoftoday’sethicaldilemmasaspossible,viewing humanityasaglobalcommunityoperatinginthemodeofalocalvillage.Diversityistheessenceof societyintoday’sworldofinstantaneouscommunications,inconstantfrenzyforspeed,andforlight. Yetdarknessprevailsattimes....

HOW BUSINESS ETHICS FITS IN THE WORLD TODAY

Everysectorofbusinesspracticeoperateswithintheconfinesofthehumanmind.Areasofknowledge include philosophy, religion, mathematics, communications, and biotics. Bankers, factories, airlines, governments, all big and small, depend permanently on the uniqueness of the human spirit and the individualityofthedecisionmaker.Algorithmsandsoftwareaboundinpursuitofautomateddecision making,yeteverystakeholderisunique,everycaseisspecial,andeverymanagerisaleader.Thisbook aimsatinstillingthesenseofautonomousdecisionmakinginthefaceofcomplexdilemmas.

Thebookfollowsasequenceofknowledgesynthesisinthreesections.Section1,“MacroEthicsof SocialWelfare,”aimsatraisingtheissuesofteachingversuslearning,specificallyinthefieldsofmoral- ity,duty,justice,andvirtue.Thissectioncontinuesontoaddressaggregateissuesofsocietalconcern: pollution,sex,taxation,climate,media,andmonopoly.Section2,“CorporateBusinessEthics,”peelsthe layersofeveryparticularareasofconcern:ananalyticalapproachisusedtoprobethedepthofillusions, anddeceptionsintopicssuchasnepotismwhistle-blowing,deceit,plagiarism,bribery,piracy,fraud, andchildlabor.Section3,“CountryApplicationsandCaseStudies,”offersparticularregardtoextreme issuesofbusinessethicsaspracticedinoneparticularcountrywheremarketforcesarereminiscentof thewildestjungle,whereextremeculturaldiversitymakeseverydaylivingaconstantlaboratorytest-

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Preface

ingofbusinessdilemmasinconstantlife-or-deathsituations.InLebanon,lifeissuchapassingillusion thatissuesofdrugproduction,tradinginhumanorgans,andrealestatefraudcarryanextremelevelof businesssignificance:marketforcesattheirwildestdancearoundthefrenziedblazeofbusinessprofits.

CHAPTER DESCRIPTIONS

Ethics Perception: Learning and Teaching of Ethics

Educationisoneofthemostconsistentandpowerfulcorrelatestothedevelopmentofmoraljudgment inindividuals.Educationbuildstheoreticalandsomepracticalbasicsformakingmoreeffectiveethical decisions.Educatorsinfluencestudentsintheirlearningaboutbusinessethics,butethicscanbecon- sideredascontinuousknowledge,whichcouldbetaughtandlearnedinwaysdifferentfromteaching traditionalsciences.However,teachingofethicsispossiblebecausetheaimistocreatecertainskills andbuildthebasicsforpromisingwisethinkingforproperdecisionmaking.Buildingethicalaware- nessinadiversesocietyimpliesbuildingawarenessinschoolsanduniversitiesbyhavingethicsasa universityrequirement.Teachingofethicsmuststartfromearlyschoolstagesandmustengageparents actively.Integrationofacodeofethicsinthecurriculumisbroughttolifebyaddressingreallifestories ofunethicalbehavior.Thischapterexploresthelearningandteachingofethics.

Utility, Duty, Morality, and Justice

Utilityisthetheoryofthegreatesthappinesstoasmanypeopleaspossible.Theendjustifiesthemeans whereconsequencesmatterandwhatmakestheactionmoralistheresult.Dutydeontologyimpliesthat wearedoingagoodjobaslongaswearefollowingtherulesevenifitisagainstourwill.Itisourduty, ourobligation,evensometimesleadingtopain.Allactionsanddecisionsshouldbeofagoodwillre- gardlessoftheresults.Ontheotherhand,moralvirtueisacquiredbyhabitanddoesnotcomebynature. Virtuerepresentsthemeanbetweenextremes.Therefore,moralvirtuehastodowithfeelingsfollowedby actions,wherethemeanisnotalwaysthemiddleoftwooppositeextremes.Thischapterexploresutility.

Abuse of Power

Thepersonthatabusespowerfindshim-orherselffacingadilemma.Thatpersonmustchoosebetween gainingbenefitsatthecostofharmingthepersontheyareabusingorself-restrainingtheirhandlingof powerandavoidingharmtoothers,astheysacrificeanypossiblegainsorenduringareductioninper- sonalbenefitsorevenoftentimesaloss.Fearofunemploymentmakesworkersgenerallywanttoprotect their jobs and definitely avoid any confrontation with their boss, which may lead to enduring power abuseinsilence.Theabuseofpowerpracticeiscommon,sincemanagershavetheopportunitytotake advantageoftheirsubordinatesfortheirownbenefits.Whatreallyvariesisthelevelofacceptanceand thetreatmentthatmustnormallyincludemeansandwaysofprotectionandpunishment.Thischapter exploresabuseofpower.

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Preface

Sexual Harassment Laws and Their Impact on the Work Environment

Thischapterexaminestheimpactofsexualharassmentlawsinaworkenvironment.Differentcontexts areexaminedwithdifferentsexualharassmentlaws.Themostvulnerableindividualsareidentified.The particularcaseofLebanonisinspectedwherefewlawsregulatethismatter.Acomparisonisestablished withtheUSA.LebanonandtheUnitedStateshaveadifferentviewofsexualharassment.InLebanon, noclearlawsprotectwomen.Inaddition,LebanonismoretolerantthantheUnitedStates.Thediffer- enceinculturesalsocontributesinpeople’swillingnesstodiscloseharassment.IntheUnitedStates, peopleareusedtotheconceptofrightandajudicialsystemthatpreservesit.InLebanon,suchamatter istaboo,andpeoplearediscouragedfromdisclosingtopreservetheirreputation.

Monopoly Abuse

Monopolyisthecasewhenafirmprovidesproductsorservicestowhichthereisneithercompetition nor a near substitute, dictating price and quantity produced. Monopolies raise concerns of unethical business practice because they perform acts of conspiracy and collusion. Consumers will be buying neededproductsatunfairpricesandquestionablequalitystandards.Theinstrumentalapproachiswhen acompanyperformsmonopolisticbehaviorinordertomaximizecompanyprofitsandsatisfycorporate shareholders.Thesocialapproachiswhenacompanyseeksthegoodofthegreaterenvironment,look- ingbeyondthebenefitofshareholders.Monopolisticbehaviormayprovidecertainpositiveadvantages likehelpingexpanddifferentindustries,generatingalotofcapitalintothebusinesscycle,introducing innovation,andbringingasolutiontosomemajoreconomicproblems.Disadvantagesofmonopolies aremal-distributionofthesocialproduct,decreasedeconomicnationalgrowth,andincreasedunem- ployment levels, blocking competitive markets, and lacking socio-economic efficiency. This chapter exploresmonopolisticabuses.

The Ethics of Social Media and Network Security: Issues in the Workplace

Adefinitionofmodernsocialmedialeadstothecharacterizationofadvantagesanddisadvantagesof socialmediaintheworkplace.Thecharacteristicsofsocialmediaare:reach,accessibility,immediacy, andpermanenceparadox.Theextentofmediainvasionofprivacyisdiscussedinthischapter,andethical dilemmasareraised.Socialnetworksareregardedasthemainreasonsforthedecreaseofproductivity andotherunanticipatedconfidentialproblems,whichacompanymayface.Furthermore,theimplications ofsecurityalertsleadtoadilemmabetweenindividualprivacyandcommoninterest.Differenttypesof attacksmightinterferewithanexistingfunctionalnetwork.RelevantcurrentissuesinNetworkSecurity include:authentication,integrity,confidentiality,non-repudiation,andauthorization.

Environmental Pollution

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Preface

theworld’sresourcesnowandleavingjustalittletothem,andthatwe’releavingtheworldpolluted andinasituationworsethanitoncewas.Thiscanbeexplainedthroughthreedifferentperspectives:the utilitarianperspective,thedeontologicalperspective,andourdutiestoothersbasedonourrights.This chapterexploresenvironmentalethics.

Climate Change: Global Warming Mitigation or Adaptation

Growingeconomiesoflessadvancedcountriescarrypartofthemitigationloadofclimatechange.A logicalframeworkanalysisidentifiestheeconomicimpactformitigationofclimatechangeinlessin- dustrializedeconomieswhereclimateadaptationseemstoofferbetterprospectsoffeasibility.Financial instrumentsareproposedwithindevelopmentofastrategicactionplaninmitigationofclimatechange. Animplementablepolicymatrixisformulatedaccompaniedwithasetofperformanceindicatorsthatare coherentwiththeactionplan.Challengesthatarespecifictogrowingeconomiesareidentified.Recom- mendationsincludelessonslearnedandlimitationsofalternativerenewableenergysources.

Tax Evasion

Taxevasionisconsideredbytheinternationallawsanddomesticlawsofmostcountriesasaformof fraud.Inmostcountries,agapexistsbetweentheexpectedtaxrevenuesandthetaxrevenuesthatare actuallycollected.Thisgapisnaturallyduetotaxevasion.Understandingwhyindividualsandorganiza- tionsevadetaxesisthefirststepinreducingtheaforementionedgap.Forataxationsystemtobewell receivedandacceptedbyboththestateandthepublic,ithastobejustandfair,clearandprecise,and takeintoconsiderationtheinterestofboththestateandthecitizen.Thischapterexplorestaxevasion.

Media Bias

Asolutiontowardsmediabiaswouldbequitehardsinceitissomehowpartofitsculture,butanattempt canbemadebyallowingwatchdogNGOorganizationstoenforcethelawwhenabreachisinevidence. Thenanyfinechargedshouldbegiventotheorganization.Thiswaytheorganizationismotivatedto continuestrictandpropermonitoring.Anethicaldilemmasurfaceswhenitshouldneverhavearisenin democraticsociety.Givethepeopletruthfulandfairaccountsofeventsandberegardedasnon-patriotic ordefendthecountrywithanymeansortactics.Journalisticethicsismostsensitiveinsituationssuch asthesewhendisagreementisseenasdisloyal.Thischapterexploresmediabias.

Corporate Social Responsibility

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Preface

accesstoresources,attractingandkeepingemployees,maintainingemployeemoraleandproductivity, meeting changing stakeholder expectations, and eventually improving the bottom line. This chapter explorescorporatesocialresponsibility.

Nepotism in a Family Business

Nepotisminbothitsbadandgoodscopesisnotmainlyaresultofnationalsocio-culturalvariances,nor isittheoutcomeofaglobaldispersionofmoralsandstandardsacrossnations.Ratheritisaculturally drivenbusinesspractice.Nepotismoccurswhentraditionalformsofinteractionarereplacedbymod- ernformswithoutacorrespondingmodernsubstitutionfortraditionalsocialmorals.Forthesuccessful useofnepotism,familymembersmustmeetcertainqualificationssuchasanappropriateeducational backgroundandoutsideworkexperience.Outsideworkexperienceisthemostimportant.Inaddition, corporationswhohirefamilymembersshouldinformthemthattheywillbefiredinthecaseofunethi- calorillegalbehaviornomatterhowcloselyrelatedtothemtheyare.Thischapterexploresnepotism.

Whistle Blowing

Whistleblowingbringstothenoticeoftheworldwrongdoingsandimmoralacts.Itisseenasanactof defenseforproperactionforanymisconduct,whichisatplaybetweenindividualcoherenceandorga- nizationalvalues.Whistleblowingisanimportantwaytopreventanddeterfraud,waste,andabusein organizationalworkenvironments.Whenemployeesarefeelinguncomfortablewithwrongdoing,which necessarily arises in organizations, their sense of morals also come into effect, which compels them tomakeanywrongdoingorunethicalactpublic.Inessence,theinterplayofpoliciesanditsdiscourse thatmakeitmarkinorganizationalrealmsfigurewithinthatmoralityconsideration;moralitypermits individualtoactmorallyandreasonably.Thischapterexploreswhistleblowing.

Toxic Waste Disposal

Recognizingtheseverityofthetoxicwastedisposal,approximately50countriessignedatreatyin1989 seekingtoregulateandcontroltheinternationalshipmentsthatcontaintoxicwastematerials.However,the primarychallengethathinderstheproperdisposalofhazardouswasteremainsthehighcostsofdisposal andthetime-consumingnatureofthedisposalprocess.Thesetwofactorsconstitutethemainreasons whysomecompaniesseekoutclandestinemeanstodisposeoftheirtoxicwastesinsteadofadheringto thelawsandregulations,thusendangeringboththeenvironmentandthehealthofsurroundingliving beings.Aproperdisposalsystemisessentialtoguaranteethesafetyoflivingcreatures,aswellasthe welfareofthesurroundingenvironment.However,sometimesthatiseasiersaidthandone,andeven disposaltechniquesthatabidebytherelevantlawsmayhaveunforeseenanddevastatingconsequenceson thelivesoftheemployeescarryingoutthedisposalprocess.Thischapterexplorestoxicwastedisposal.

Advertising Deceit: Manipulation of Information, False Advertising, and Promotion

Deceptiveadvertisingdenotesaproducer’susageofmystifying,deceiving,orblatantlyuntruestate- mentswhenendorsingaproduct.Thereareseveralillegalmethodsforattemptingtodeceiveconsumers. Thiscanbedonethroughconcealedfeesortheusageofsurcharges.Deceptiveadvertisingcanalsotake

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Preface

placewhen“goingoutofbusinesssales”chargeconsumersmoreforproductsthathadalreadybeen markeddown.Advertisinglawidentifiesthemanipulationofstandardsasdishonestyundercustomer law.Undefinedterminologyisalsoconsideredaviolationunderconsumerlaw.Marketingdeceitisa practicethatcanequatetoacrime.Thus,amarketershouldnotgetinvolvedindeceivingtheirpotential customersforthismanipulationwouldleadtovariousharms:iterodesone’sself-confidenceandhin- dersthedevelopmentofresponsibleadvertising.Bigcompaniesmakebigmistakes,thisistosaythat trustassociatedwithbigcompaniesholdssevereuncertainties.Thischapterexploresadvertisingdeceit.

Plagiarism

Plagiarismiseasilydifferentiatedfrompiracy.Piracyisthesaleofqualifiedbutunauthorizedcopiesof awork,anactiongrudgingtheauthorofprofitbutnotcredit.Deprivingauthorsofprofitthatisright- fullytheirsistheft,butplagiarismfocusesonownershipcreditratherthanprofit.Themainworriesfor plagiarismareitsinfluenceoncreativity,motivation,andabilitytothinkinalternativeways.Thesequali- tiesofpersonalitymaybenegativelyimpactedbyhabitualplagiarism.Moreover,thevariousimpactsof plagiarismarelackofinformationauthenticity,fakecredit,personalityfaults,spoilingofprofessional reputation,anddestroyingthecreate-abilityofcreativeprofessionals.Thischapterexploresplagiarism.

Bribery and Corruption

Bribesaremainlydirectedatgovernmentofficials,althoughtheycouldbedirectedattheemployees andmanagersofbusinessfirms.However,briberyappearstobeaself-definedcrime.Briberyofsmall public sector employees is a white-collar crime. However, bribery also exists in high-level decision- making processes, whether political, economic, or corporate situations. These are large-scale bribes, consistingofmillionsand/orbillionsofdollars,paidouttoexecutivesandpublicofficialsinreturnfor constructioncontracts,oilcontracts,telecommunicationcontracts,etc.Althoughpunishmentsexistand areimplemented,itisuptotheindividualalonetomakethefinaldecisionandchoosebetweenpersonal moralvaluesystemandpersonalwelfareinoppositiontoservingthepublicwelfare.Thischapterex- ploresbribery.

Piracy of Intellectual Property Rights and Copyright Infringement

Originatorsofbooks,songs,ormoviesspendalotoftime,effort,andmoneytocomeupwiththeir creativework.Inordertoprotectthevalueoftheirproduction,theyissueacopyright.Thiscopyright entitlesthemtobenefitfromprofits(royalties)andatthesametimeprohibitsothersfromillegalre- productionwithoutpermission.Fromanethicalperspective,theimpactofpiracyaffectsanumberof stakeholderssuchasconsumers,artists,andgovernment.Consumersbenefitfromlowpricesandsuffer whentheyfindoutthattheyhavepurchasedapoorqualityproductfromonlinewebsitesorwhenthey donotreceivetheproductstheypaidfor.Artistsorproducerssufferastheyaredeprivedfromcollecting theirroyalties.Thisnegativelyaffectscompaniesduetolossesinrevenues.Governmentsareincapable ofcollectingtaxesfromtherevenues.Anumberofsolutionsareavailabletocombatpiracy.Thischapter exploresintellectualpropertyrightsandcopyrightinfringement.

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Preface

Ethical Yielding

CustomerProfitabilityAnalysis(CPA)isaprocedurethatprovidesmanagementwithinformationrelated tocustomersthatwillallowthemtomanagerevenuefromaprofitperspective.Thedataattainedfrom CPAwillassistwithdecisionsregardingmarketing,productdevelopment,andcapacitymanagement tocreateacustomermix,whichwillprovidethebestprofitresults.BARmeansthebestavailablerate, inwhicharegularcustomerischargedincasehehasapprovedtoreserve.Thevariousstagesofyield managementinclude:1)growaprofitculture,2)studytheoveralldemand,3)createpricevaluerelations, 4)formsuitablemarketsegments,5)evaluatethepatternofdemand,6)findthefailuresanddenials, and7)assessandreviewthesystem.

Financial Fraud: Embezzlement, Ponzi Schemes, and Credit Fraud

Fraudisadeceptiondeliberatelypracticedinordertosecureunfairorunlawfulgain.Financialcrimes affectprivateindividuals,companies,organizations,andevenstates,andhaveanegativeimpactonthe entireeconomicandsocialsystemthroughtheconsiderablelossofmoney.Itisverydifficulttoestimate theamountofmoneyoffraudaroundtheworldsincemostofthetransactionswillneverbeactually reported.Announcinganyfraudincidentcouldaffectnegativelythecompanythatisreporting,since anypublicitywouldmakecustomerslosetheirconfidenceinthecompanyandthereforethepriceofthe sharewoulddropsignificantly.Therefore,companieswouldnotbewillingtorevealanyassumptionsof fraudandwouldtrytokeepthewholestoryawayfromthemediaandstakeholderstominimizenegative outcomes.Thischapterexploresfinancialfraud.

Child Labor

Childlaborisasocialprobleminvadingtheworldandespeciallythelessdevelopedcountrieswhere educational levels are low. Despite the laws that are enforced each year by international agencies to preventchildlabor,realitydoesnotreflecttheefficacyoftheselaws.Twocases,oneinternationaland onelocal,reflecthowabusedchildrenarebeingtreatedaroundtheworldandhowtheirrightsarebe- inginvaded.Illiteratepoorfamiliesaswellasbusinessescontributeintakingadvantageofchildlabor inservingtheirownprofits,especiallywiththelackofstrictregulationsthatabolishthisissue.Child laborisanissuethatcannotbeneglectedandahumanrightconcern.Itisaffectingchildrennegatively becausetheyarebeingexploitedandforcedtoworkataveryearlyage,whileotherchildrenaregetting educatedandhavingaproperchildhood.Thischapterexploreschildlabor.

Organ Selling: When It Becomes a Business

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Preface

sellingshouldneverbelegalizedsincetherewouldalwaysbeapricewaranditseffectscouldnotbe confined.Peoplebynaturearegreedy;thus,leadingtoblackmarketagain.Moreover,thedemandis muchmorethanthesupply;thus,thereisnospecifiedcriteriaforwhoreceivestheorganasanymethod usedwouldeventuallyleadtomorecomplications.

Real Estate Valuation Fraud

Valuationprofessionisalinkbetweentheborrowerandthelender.Fraudisanintentionaldeliberate deceptioncommittedforillegitimatepersonalgain.Thereareseveralformsofrealestatefraud,especially whentherealestatemarketisfacingaboom.Themostwidespreadtypesofrealestatefraudinclude thepreparationoftwosetsofsettlementstatements,propertyflipping,andfraudulentqualifications. Therearemainlythreetypesofvaluationtolookoutfor.Valuationmaybereceivedfromanunauthor- izedagency.Furthermore,arealvaluationmaybealteredfromtheoriginaltogenerateprofit.Thirdly, intentionalinflationofthevalueofapropertywillhidetherealmarketvalue.Itisusuallydifficultto spotrealestatefraudulentactivities,sodeepinvestigationsandprofessionalismisneeded.Thischapter exploresrealestatefraud.

Illegal Drugs in Lebanon: Recreational or Medicinal… Who Is the Victim?

Based on utility, Lebanon is pursuing illegal drug trade activities for the monetary value they offer. TheethicaldilemmaisthatLebaneselawprohibitsdrugplantation,yetthegovernmentisimplicitly encouragingtheseactivities,thusthecontradictionandthecorruptiondilemma.Onapharmaceutical andeconomicallevel,drugshaveapositiveoutcome,butonarecreationalandabusivelevel,drugscan beveryharmfulandsometimesdeadly.Theyarenotdangerousbecausetheyareagainstthelaw;they areagainstthelawbecausetheyaredangerous.Lebanonshouldlegalizesomedrugs,theonesthathave minimalnegativeeffectonconsumers.Therefore,Lebanon’seconomywouldstillbenefitmonetarily fromthisindustry,whilemakingthelifeofthefarmersmucheasier,andmaybegivethechancetopoor ruralareastooffersecurityandamoderatelevelofliving.ThischapterexploresillegaldrugsinLebanon.

CONCLUSION AND IMPACT

Thisbookpromisestoservemultiplepurposes.Whereasitstartedasadepositoryofinvestigativeconcerns regardingpracticalbusinessdilemmas,ithasevolvedintoaresearchsynthesisofprominentliteraturein everyoneoftheissuesinvestigated.Atlast,itappearstobeanobviousstand-alonelearninginstrument thatcanbestructuredwithinacurriculumofhighereducationinanyschoolofbusiness.Thisbookwill hopefullyserveformanyyearsasauniversitytextbookinbusinesseducation.Furthermore,itpromises toevolveinsubsequentversionswithupdatesonspecifictopicsofinterest,whileitwillalsoopennew domainsofinvestigationinrecentlyevolvingfieldsofbusinesscommunicationsandcrisismanagement, suchasWebsecurity,privacy,andbioticcloning.

Philippe Zgheib Lebanese American University, Lebanon

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xxiii

Acknowledgment

The author would like to acknowledge the help of all involved in the review process of the book, without whose support the project could not have been satisfactorily completed. Deep appreciation and gratitude goes to Dr. Steven McNamara, Professor of Business Law, for his feedback and support. In addition, sincere appreciation goes to all business graduate and undergraduate students at the various universities of Lebanon who have participated in the business surveys and in data collection for the various studies mentioned in this book.

Sincere thanks go to all those who provided constructive and comprehensive reviews for their unwavering support. Gratitude goes to my colleagues at the Olayan School of Business at the American University of Beirut, also to my venerable dean, Dr. El Fakhani, at the School of Business in the Lebanese Ameri- can University, whose enthusiasm motivated me to initially accept the invitation to take on this project. Special thanks also go to the publishing team at IGI Global, USA, whose contributions throughout the whole process, from inception of the initial idea to final publication, have been invaluable.

Special thanks go to my immediate family, whose unconditional love and vibrant energy have kept me going against all odds. My loving gratitude goes to the genius and spirited company of Alma, Yara, Naim, and especially, Wadih, who has also helped me in the final editing of the manuscript. And last but not least, my better half, Nathalie, has kept us all pointed in the right direction aiming for nothing less than the stars through her unfailing support and steady encouragement during the months and years it took to give birth to this book.

In closing, I wish to thank all my friends and foes alike for their valuable insights and for their excellent competitive minds. I hope this book will bring a lasting impact of making our business world and our daily lives better than we found them.

Philippe Zgheib Lebanese American University, Lebanon August 2014

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Introduction

Simplisticsubjectivismreferstotheviewthatethicsissimplyamatterofpersonalopinion,thatthere isnothinganyonecansayordotochangeaperson’smindaboutethicalissues.Culturaldiversityliesin theperceptionofbusinessethicsandnotintheapplication.Commondenominatorofpeoplediversity istheprimaryconcernwithsecondarycaringforprofitmaximizationandconservationofwealth.A diverseculturemaydisregardacademicintegrityandthusmaylacktheessenceofbusinessethicstoan extentwherebehavingunethicallybecomesanormalhabitbuiltincultureandintraditions.

TomRobbins,novelist,reclaimsthat:“Weareourowndragonsaswellasourownheroes,”and“we havetorescueourselvesfromourselves.”Yet,wearewhatwelearnandperceiveandthuswechoosewhat tobe.Peoplearenotcreatedofthesameskillsandabilitiesinlife,andtheyarenotraisedinthesame conditionsandcultures.Theyallsometimeshavedifferentperceptionsofthingsanddifferentpersonal opinionsthateachonemayconsiderhis/hertruthbasedonhis/herlevelofknowledgeandunderstand- ing.ThisisoneofthemajorchallengesinethicswhichiscalledbyNancyJ.Matchett(2009)“simplistic subjectivism”.Sheexplainsitsaying“Simplisticsubjectivismreferstotheviewthatethicsissimplya matterofpersonalopinion,thatthereisnothinganyonecansayordotochangeaperson’smindabout ethicalissues;indeed,thatthereissomethingwrongwithtryingto”(Matchett,2009).Afterall,people havearighttotheirownopinion,andethicsisjustaboutbeingtruetoyourcorevalues”.Howeverwhat ifcorevaluesandthewaythatanindividualunderstandssomethingwaswrong?

DEFINITIONS

Ethics

Ethicsisawayoflifethatconstantlyevaluatesdecisionsinaspaceofmoralimaginationwhereevery dilemmaissettlesinfullknowledgeofrationalesandunderlyingphilosophies.Assuch,ethicscreatesa spaceofsocialintegrationwhereeverydilemmaissettlesuniquelyinitsowncircumstances,andactors. Ethicsallowtheconfrontationofchoicesbetweenrightandright,orevenbetweenwrongandwrong. Theobviouschoicebetweenrightandwrongisthusautomaticallysettled.

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Business

Businessisaworldofactivityaimingatsatisfyingwantsandneedsthroughmarketmechanisms.In thesameprocesswealthisaccumulated,investedorredistributed.Government’srolecanbehelpfulor detrimental,businessproceedsanyway.

Diversity

Intoday’smodernworld,theglobalcommunityhasbecomealocalvillage.Communicationhasbrought everyonesoclosetogetherthatdifferencesofculturetradition,language,religion,governance,gender anddemographicshavebecomeinterwovenintrinsicallyinaglobalmeltingpot,theresultisaworldof diversitywheredifferenceisrecognized,andmustbecelebrated.

PERCEPTION OF BUSINESS ETHICS IN CULTURAL DIVERSITY

Thisbookwillfocusonbusinessethicssensitivity,perceptionandawarenessamongBusinesspeopleas adiversesociety.ResearchersshowedthatBusinessproblemliesintheperceptionsideofbusinessethics andnotintheapplication.Accordingly,awakeningthemisanindispensablestepsinceitforbidsthem fromchoosingunethicalfuturedecisions.Furthermore,alatestsurveybyaWalkerResearchofIndia- napolisabouttheperceptionofethicsexposedthatemployeesshowpreferancetoworkatcorporations whichdistinguishbusinesspracticesasethicalpriortoworkinafinancialstablecompany.(“Business EthicsResearchProposalSample”,2008).Ontheotherhand,businesspeopleareprimaryconcerned withthetheoryofprofitmaximizationcaringlesstothewaysthatproducemoney.MostofBusiness peoplerestricttheirselvestopowerthatisgeneratedfrommoney,andthusgiveitagreatimportance intheirattitudesandbehaviorsintheireverydaylifeandtheyrefertoitas“thefinalsay.Briberiesfor examplearenowbecomingacommonpracticeinmanydiverseculturalsettings.

TRENDS

Corporationsingeneral,actasacivilizingagentandplayanessentialroleintheindustrialandcom- mercial developments of their mother countries. Although their primary goal is to maximize profit nonetheless;therehappentobemorecrucialthingsthanensuringtheirsurvivals;whichareitsethics. Companiesthatlackvirtuessuchashonestyandtrustmustbehaveethicallyintheirjourneytoensure theirpermanentsuccess.Beingproductiveandefficientarebasicstoachieveprofitsbutourstudygoes beyondthisoutcometotheessenceofsuccess:ethics.Businessethicsnowadaysisconsideredabud- dingsegmentofethicsandthebusinessworld.Kreitnerbelievesthat“[e]thicsisdefinedasthestudyof moralobligationinvolvingthedistinctionbetweenrightandwrong”(1998,p.142).Itparticularlydeals withtheperceptionofbusinessethicsandthebehaviorrevealeduponit.Itissetofregulationandlaws orevensocialdisciplinegoverningthecorporatetransactions(Moussawer,2004).

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Introduction

REFERENCES

Ghillyer,A.W.(2010).Business ethics: A real world approach.NewYork:McGrawHill.

Hartman,L.P.,&Desjardins,J.S.(2011).Business ethics: Decision making for personal integrity and social responsibility.NewYork:McGrawHill.

Jennings,M.M.(2009).Business ethics: Case studies and selected readings.SouthwesternLegalStud- iesinBusiness.

Matchett,N.J.(2009).Cooperativelearning,criticalthinking,andcharacter.Public Integrity,12(1),25–38.

Moussawer,T.N.(2004).Business ethics sensitivity and awareness in Lebanon: An empirical investiga- tion.AcademicPress.

KEY TERMS AND DEFINITIONS

Business:Isapracticeofexchangeaimingatraisingaprofitthroughprovidingaproductthatsatis- fiesaneed.

Diversity:Celebrationofdifferencesinculture,tradition,language,religionand/orotherdemographics. Ethics:Awayoflifeinaspaceofmoralimaginationwhereongoingdilemmasaresettledinfull

knowledgeofrationales. Simplistic Subjectivism:Theviewthatpersonalopinionunderliesdecisionsinlife. Workplace:Dynamicspacewherebusinessoperationsareconductedawayfrompersonalindividual

concerns.

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APPENDIX

Learning Objectives

L.O.1:Definebusinessethics. L.O.2:Characterizeworkplacediversity. L.O.3:Definesimplisticsubjectivism.

Summary

Define Business Ethics

Objectiverationalmechanismforsettlingdilemmasonthego.

Characterize Workplace Diversity

Theglobalhumancommunityisquicklybecomingalocalvillagewherediversitymustbecelebrated.

Define Simplistic Subjectivism

Simplisticsubjectivismreferstotheviewthatethicsissimplyamatterofpersonalopinion,thatthere isnothinganyonecansayordotochangeaperson’smindaboutethicalissues.

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Section 1

Macro Ethics of Social Welfare

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Chapter 1

DOI: 10.4018/978-1-4666-7254-3.ch001

Ethics Perception: Learning and Teaching of Ethics

ABSTRACT

Education is one of the most consistent and powerful correlates to the development of moral judgment in individuals. Education builds theoretical and some practical basics for making more effective ethi- cal decisions. Educators influence students in their learning about business ethics, but ethics can be considered as continuous knowledge, which could be taught and learned in ways different from teaching traditional sciences. However, teaching of ethics is possible because the aim is to create certain skills and build the basics for promising wise thinking for proper decision making. Building ethical aware- ness in a diverse society implies building awareness in schools and universities by having ethics as a university requirement. Teaching of ethics must start from early school stages and must engage parents actively. Integration of a code of ethics in the curriculum is brought to life by addressing real life stories of unethical behavior. This chapter explores the learning and teaching of ethics.

INTRODUCTION

Is it too late to start teaching ethics at Universi- ties? Education opens the minds of students to considering ethics in every detail of their business career. Education validates, reforms, and expands the individuals’ perceptions and beliefs since there are various sources of knowledge for dilemmas. Students are captivated with huge values, that can’t be changed. Ethics is not like science or math to be taught and learned, it is designed since the early stages of our life. Also, because at certain situations some people don’t see ethical problems as others do.

Reasons why we need business ethics educa- tion include:

1. Global companies recognize that ethics is the essence of business hence it is crucial to integrate ethical values in their businesses;

2. Companies cannot survive in isolation, the need to act socially;

3. Companies are no longer just competing for profit but also for reputation hence most of them are recruiting and training ethical employees.

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Learning and Teaching of Ethics

BACKGROUND: CAN ETHICS BE TAUGHT OR LEARNED?

Reaching uniformity in ethics so that there is only one opinion about how to behave in certain dilemma is impossible, but at least removing the clear misconceptions and common mistakes that people mainly fall in should be well known to be avoided. Hence, we should always have someone to teach us how we should think and take effec- tive decisions, reform and explain for us why doing so and so could be wrong and bad to the community. No one is familiar with everything. We need sometimes the teaching or assistance from more experienced individual than us, who have passed through similar dilemmas and have become knowledgeable about them in order to make us aware of certain hidden truths. Particularly in dilemmas we are not dealing with two clear positions, one is good and the other bad. On the other hand it is between two extremes that could both be good, or both are bad. Therefore teaching of ethics will provide decision making rationale for different kinds of real life situations, which make it easier for learning and taking the correct decisions. Also, being negligent about unethical consequences of actions does not justify improper behavior. Thus, teaching of ethical thinking will remove ignorance and make people more socially responsible for their actions and decisions.

Education’s Role in Behaving Ethically

The major source of attaining, reforming, and testing our knowledge and perception is educa- tion (McCabe et al., 1991). Education is one of the most consistent and powerful correlates to the development of moral judgment in individuals. Starting from the elementary classes at schools to the undergraduate and post- graduate studies at the universities, education provides fertile grounds through carefully designed stages to grasp

unlimited knowledge. In the university stage, un- dergraduates start experiencing the real life and its drifts, and in the former the child starts building perceptions and personality. This long journey will be expressed in the business filed especially when the individual faces complicated decisions and ethical dilemmas. Perhaps what the individual faces during their education is simpler than what he/she is going to face in real life. Education builds the theoretical and practical basics of the sciences and skills, while it also builds similar basics for taking more effective ethical decisions. “Educa- tors influence students in their learning about business. Therefore, higher education faculty members should be able to influence students in their learning about ethics as well” (Gloria, 2002). Education makes the minds of the students opened on considering ethics in every detail of their business career. For example, teaching the student to succeed with high academic integrity, he/she will not cook the accounting books to show that their company is highly successful. Also, giving examples and always reminding marketing students about the dangers and unethical conse- quences of untrue advertising will at least make them think before acting. Moreover, since there are other sources of knowledge, and given the variety of dilemmas, stakeholders, consequences, business executives are in need for ethics educa- tion to validate, reform, or discuss and expand their perceptions and beliefs. For example, the framework of ethical thinking that consist of seven steps, with practice and application to multiple case studies at all the education stages, will lead later to high volume processing of wisdom while deal- ing with complicated problems. Kohlberg (1981) found that a person’s ability to deal with moral issues is formed in stages of the pre-conventional, conventional, and post-conventional physical de- velopments. Kohlberg found that education is one of the most significant factors that can stimulate a person’s growth through the three levels of moral development. “Kohlberg discovered that when his

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Learning and Teaching of Ethics

subjects took courses in ethics and these courses challenged them to look at issues from a universal point of view they tended to move upward through executive levels.” (Sims & Felton, 33)

Furthermore, teaching ethics is not like teach- ing standard rule to be applied in all situations, it is how you teach the student how to think and behave when he/she faces certain dilemma. It is like the vaccination that injects weak virus inside the body. Hence, the person will get used to it, and initiate an effective defense (way of thinking and analyzing) to take the most suitable decision in the dilemma which is the real harming virus. Therefore, in addition to teaching the principles and the details of every major to develop the required career skills, ethics logic and concepts should be added to direct students to an ethical career too. As a result, student will realize that being ethical in every action he/she takes, is a requirement for true successful job.

Ability of Teaching and Learning Ethics

Certain groups of people from both academic communities and business argue that ethics could not be taught or learned as what was stated in the Wall Street Journal. They claim that it is too late to start teaching ethics at Universities, because students were bombarded with huge set of values, that can’t be changed. More specifically, ethics is not like science or math to be taught and learned, it is kind of concepts that are designed since the early stages of our life, and according to Miller (1976) “honesty” is not a course to be taught.” Also, because at certain situations some people don’t see ethical problems as others do. Conversely, since ethics was learned and grasped in the past it can be considered as continuous knowledge to be always taught and learned. Yes it is not as science and math, it is beyond standard rules and it could be taught and learned in other way than teaching such traditional sciences. Moreover, Lester Thu- row, former dean at the Management School of

Massachusetts Institute, validate that ethics could be taught and leaned by saying “Universities and colleges can do little if students have not already learned ethics from families, clergy, previous schools, or employees (Trevino and Nelson, 1999). Furthermore, if people don’t see ethical dilemmas, this doesn’t mean that they do not exist. Even though the law considers the intent in punishing for torts such as doing unethical behavior, but also it punishes for being negligent about dangerous consequences if they exist.

Hereafter, ethics could be learned and taught because the major consideration is not to teach students that if X occur how to deal with it. In real life there are unlimited dilemmas and even unlimited conditions for the similar dilemmas. However ethics teaching is possible because the aim to create certain skills and built the basics for promising wise thinking that is able to choose the better choice. Recent researches discovered that teaching ethics has a great influence on students’ analytical and reasoning skills and “that moral behavior can be developed from a thorough un- derstanding of ethical concepts and dilemmas and reinforced by awareness of ethical issues (Alam, 1999; Sims and Sims, 1991).

AMPLIFYING THE NEED FOR ETHICS

Teaching ethics in the consequences of recent global financial crisis is a social obligation and an immense opportunity for professional educa- tors to teach and train the next leader generation to be ethical and better than the proceeding ones. (Cavalere, Mulvaney, and Swerdlow, 2010) In addition, many research papers and a growing number of published articles have tackled this is- sue, varying between describing the ethical setting primarily to what should be done to enhance the ethical level. Nowadays, global companies recog- nize that ethics is the essence of business hence is crucial to integrate ethical values in their busi-

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Learning and Teaching of Ethics

nesses. Knowing that companies cannot survive in isolation, the need to act socially responsible is increasing dramatically and promotes the qual- ity of the community life. They are no more just competing for profit but also for reputation hence most of them are recruiting and training ethical employees.

Moreover, Robert Noyce, “The Mayor of Sili- con valley”, believes that: “If ethics are poor at the top, that behavior is copied down through the organization.” (“Business Ethics Quotes/Respon- sibility Quotes”, n.d). Therefore, top managers are responsible to transmit a good image and reputa- tion of their company by being ethical managers. Professional companies nowadays, adopt code of ethics which is a right choice but is not considered a cure. And thus, mangers should support the code of ethics and must ensure that is integrated through the value system of each employee.

Indifference about Ethical Behavior

In the 80s, “business ethics” term was barely used in the world of business. Companies at that time were nurturing ethics and living in harmony with them. (“Business Ethics Research Proposal Sample”, 2008). However, as com- petition increased, companies started harshly competing for their core purpose, leaving ethics lagging behind. As a result, various erupting scandals, ethical misconduct and briberies such as WorldCom, Enron, Tyco, the savings and loan devastation of the 1980s, and other scandals of the early 2000s,Nasdaq, Ford. shed a light on a huge deficiency of ethics in the business community. (Cavalere, Mulvaney, &Swerdlow, 2010) Thus, in this case building awareness is a vital process and must be implemented in our daily basics. Companies for instance, believe that supporting unethical decisions will earn them more profit and thus an opportunity to grow. This may be the case but only for short-term, but what they have missed is that these behaviors will cause them a loss of their public image, reputation, and certainly mil-

lions of dollars each year that is because of high lawsuit costs... Lantos argues that: “[Un]ethical business practices lead to societal costs which are borne in part by everyone who wishes to survive and thrive in that society.” (Lantos, 1999)

BEHAVING ETHICALLY IN ATTAINING BUSINESS OBJECTIVES

Alleviation of Corruption Levels

It is really shocking to know that only 25% of the sampled students hear about ethical dilemma in Lebanon; indeed Lebanon records high levels of corruption in most of its domains. For example, the Lebanese Center for Policy studies realizes that 62% of the firms admit paying bribes to the public servants. We are not going to dig deep in the corruption level in Lebanon, but it is well known that its presence create a fertile soil for unethical behavior in all the business domains and others. Particularly in the Judiciary system where 34% of the Lebanese population thinks that it is highly corrupted and 47.9% moderately corrupt (Information International Research Consultant, 105). Such percentages show that ethics education is indispensable because corruption is one of its consequences and the party responsible to reduce it is already drawn in it. This will “damage invest- ments, distorts political and economic develop- ment, makes civil and basic rights in danger, and introduces inefficiency in dealing between the state and private interests” (Johnson, 26).

Serious Role of Education in Building a Culture of Trust

For many years, The American Assembly of Collegiate Schools of Business (AACSB) has wanted to include ethics education into the busi- ness curriculum. Critics criticize that business schools focus put too much effort on teaching how to maximize shareholder value and too little on

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Learning and Teaching of Ethics

the ethical and social aspects of business leader- ship. According to some analysts and scholars, ethical behavior cannot be taught. But many do not assume this position, as the general idea is that ethical behavior can and should be tackled in education. The issue of teaching ethics is not novel. Philosopher Socrates discussed this subject over 2,500 years ago, and claimed that ethical behavior is the consequence of knowing what the right thing to do is, and thus it can be taught to individual.

Many would agree with Socrates today. Modern-day researches of moral development show that (Hammer 2002):

• Developments happen during the 20s and 30s, as young adults face ethical problems more frequently and learn how to deal with ethical problem solving..

• The individual’s perception of soci- ety and his/her role in it is also linked to development.

• An individuals’ perception of moral issues is highly influential on his/her behavior.

• Educational efforts that are aimed at rais- ing awareness towards moral problems, and improving the reasoning/judgment process, have proven to be effective .

Therefore according to this research, and in accordance with Socrates, ethics can be taught to individuals. Educational institutions around the world, in the Arab world and more specifically in Lebanon, have to understand this fact, and start offering courses that would promote moral development and ethical behavior. From Enron to Xerox and WorldCom, the series of corporate scandals is drawing attention to the ethical failings of the business world. Schools and universities have the imperative role of preparing students for that world, and academic integrity should be the starting point. As Students at the American University of Beirut, we are harvesting the posi- tive effects of such decisions.

In the business world of today, given the ever- increasing competition between firms and the proved payoffs of illegal and unethical actions, it is hard to believe that academic honesty can go on to become professional ethics. “College is an in- credibly formative period. It is a time when young people redefine their vocational aspirations... when a community that teaches ethics well can make an impact. It can be a very powerful time.” (Elizabeth Kiss, director of the Kenan Institute of Ethics at Duke University)

While students do face some ethical problems within the university, a new set of more challenging and life shaping problems occurs after graduation. Experience in real-world situations is valuable, and is very different from academic experience. Universities now offer a handful of classes ad- dressing ethical issues beyond the university.

A New York Times article published in No- vember 2002, states that “with student cheating on the rise, more colleges are turning to honor codes.” According to the story, 30% of students said “cheating during tests or exams” occurred “often or very often” (Hammer 2002).Ethical dilemmas faced at universities are a preparation for complex situations students could face in their professional life. Every person (graduate or not) will ultimately encounter tough choices, and the path he/she will follow may be a consequence of the ethical environment he/she has been exposed to at the university level. Lebanese universities are facing a problem regarding academic integ- rity. It is known that many students cheat on their exams, or get external help in their academic projects/papers. Many efforts are being made, at the American University of Beirut, in order to promote integrity and ethical behavior; a recent example of such hard work was the launch of the “bicharaf.org” campaign, promoting trust and integrity between students and their professors. This campaign encouraged all students to fill an on-line survey in order to increase awareness about the issue. Other Lebanese universities such as USJ are also joining efforts by creating a new

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Learning and Teaching of Ethics

academic program about ethics. In the long run, these efforts will hopefully have a positive impact on the whole business community in Lebanon and even other Arab countries

FORMAL BUSINESS ETHICS EDUCATION

A broad perspective of business ethics theories and issues provides a review of essential principles, practices, and opportunities in Business Ethics and to develop working knowledge and skills for effective use of these tools and techniques in business decisions.

A university course in Business ethics is typi- cally intended to perform the following outcomes:

• To understand the role of public perception in defining ethics.

• To foster an understanding of business eth- ics as a multi-level construct that can be analyzed at the individual, organizational, and societal level.

• To familiarize executives with a frame- work for ethical decision making.

• To foster ability to apply a framework for ethical decision making.

• To develop capacity to identify and analyze different and recurring ethical dilemmas in the workplace.

• To stimulate the local investigation, analy- sis, and application of Western-centered Ethical concepts, definitions, and practices.

• To provide the opportunity to reflect on personal ethical values and beliefs.

• To foster managerial abilities in plan- ning, constructing, and defending ethical choices, arguments and practical ethical solutions in simulated business-related scenarios.

• To foster active listening and debate com- petencies through in class discussions and teamwork assignments.

• To provide a working knowledge of the role of ethics in business and relevant busi- ness ethics debates.

Business executives in today’s modern mar- ketplace need to be equipped with an in-depth appreciation of business ethics at the individual, organizational, and societal level. Issues such as corruption, sexual harassment, fair trade, fraud, whistle-blowing, corporate social responsibil- ity, ethical norms, ethical values, environmental responsibility and many more are earning acute relevance in the global international as well as local domestic context. Ultimately, this text book is designed to foster skills related to critically analyzing the ethical and social dimensions of business-related problems in order to build more ethically-informed rationales for decision making in a modern world of diversity.

Culture Lacking Academic Integrity

Researches that tackled this issue showed a highly positive correlation between academic integrity at school and business ethics at work, In other words, students that used to engage in academic misconduct at their schools are likely to engage in scandals at their work. This sheds light to the importance of teaching ethics at schools whereby students learn to choose the best according to their perceptions, and to context. In Lebanon, it is clearly stated that culture is not aware of academic integrity and therefore lack the quintessence of business ethics to a degree where acting unethically becomes a usual pattern in the country’s culture and traditions. Based on an interview made with Deputy Director of Bicharaf, individuals’ behav- iors are based and influenced by their perception about business ethics (personal interview, Victor Murad).Aiming to gain a better insight about the relation between business ethics perception and application among Lebanese people, a sample survey was conducted on 30 business students from the American University of Beirut. The rea-

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Learning and Teaching of Ethics

sons of people’s rating toward business ethics are determined by various aspects such as: economic situation of the country which is a major role in changing their attitudes, habits and cultures, and the political situation.

Answers varied among students. For example, 60% answered that they rate business ethics as low and 40% believed that it was minimum. The interesting fact about it is that is none rated busi- ness ethics to be very high in Lebanon, which can be translated as a great opportunity to invest and work in. At first sight, people confuse between the right ethical choices and the legal ones. Thus defining what is ethical is a hard and basic step to do before proceeding to whether to choose it or not.

Many research papers have investigated the level of corruption in MENA region, and de- signed ways and theories to measure it, few have highlighted the importance that education could play in diminishing corruption and hence few have targeted the educational system. Particularly, academic integrity issue is given a little importance in schools and community, holding apparently a slight role in the culture of the schools.(“Applica- tion for an IDRC research grant”,2010).

The phenomenon of a culture deficient from academic integrity is in itself disturbing, by as- sociating with the corruption levels at work place implies an even more alarming case. The lack of business ethics and alleviation of corruption lev- els form an obstacle to grow and be prosperous. Thus, academic integrity should be enhanced in the undeveloped countries such as Lebanon.

And with the increase of demand on business ethics globally, many new Non Government orga- nizations, NGOs, was established such as Ethics Resource Center.ERC, in the United States. Yet, in Lebanon Bicharaf, a local business ethics and academic integrity initiator deliberated to be the first step in the change process in its community. It is not limited to create ethical awareness among school and college students but also to employees and business experts. It effectively convinces

anybody that ethics is the success for any business and is significant in devoting resources, time, and money into. (Bicharaf, 2009)

Founded in 2004 at AUB, Bicharaf is the sole NGO in Lebanon that is concerned with creating business ethics awareness. It enhances academic integrity levels targeting numerous schools with different classes around Lebanon. It built a contact relationship with students and their professors, investigate ways and pos- sible measures to promote academic integrity in schools, encourage students to behave ethically besides supporting college students, universities by offline (workshops, presentations, seminars with professors) and online(website, newsletter, tutorials) tools and companies to ensure them an ethical culture. Bicharafuntil now have reached 88 schools, 300,000 students, 12 universities and six companies. Furthermore, it extended its core mission to become a regional NGO by partner- ing with a Saudi school and built its own code of conduct. It believes that academic integrity and business ethics should be taught early to students, since they will be the ethical leaders.

Recently, Bicharaf is conducting a research project on 40 Lebanese private and public schools with a total of 8000 students to measure and en- hance the level of academic integrity aiming to change the students’ attitudes and escalating the level of academic integrity among them. Volun- teering students in Bicharaf club will participate in an academic integrity camp. Spoke persons will explain more about academic integrity and its importance. They will get an online certificate that they have academic integrity and pledge to behave ethically.

Building Awareness in Schools and Universities

Any ethics course should not be meant to be a hard course that will make students work only for a grade on their transcripts. It is a highly important

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course, since everything else can be acquired using a book, from finance, marketing, law, economic… but not ethics. It is a universal issue that is not just restricted to some disciplines like business, engineering, philosophy or medicine; each and every person should be influenced by. Ethics is beyond standards and rules as we said and it is taught through life experience. From a student’s point of view, learning such delicate material is affected by many factors, of which we can say: The way the course is taught, the professor that guides us students through the course and the degree to which students are being involved in the progress of the course. Recognizing the importance of ethics courses has been shown through several years. A couple of years ago, ethics course were just an elective course that students could take as part of their curriculum. This year, this course has not only become a major requirement for business students, but also a university wide humanity. When this course was just an elective, not many students were excited to enroll in it. Now, more than 350 students are taking the course per year. We did not recognize the importance of this course until we took it. As we realized in the survey that only 33% highly challenge themselves to take the right decisions, the percentage of respecting copy rights was like 60% sometimes, 20% always, and 20%never. These results among students at the American university of Beirut are not that com- fortable. For that reason, an ethics course should be required by each major in the university and it should be taken highly seriously. This being said, having to take ethics a university requirement would most probably follow the virtue theory, because it would provide moral habituation and moral practice. Students that would have to take these courses would somewhat provide guidance to students when faced with much harder and complicated dilemmas. The moral mean is rela- tive to the individual and to the circumstances in which the individual is situated. Arguing with a classmate regarding a certain ethical issue is not that challenging, however it sets a blueprint for

more complicated situation where that student would have to choose following ethical beliefs or engaging in unethical behavior. Some people do not care for other people feelings, interests and for the well-being of society, and are willing to engage in unethical behavior in order to achieve their personal goals. Implementing and focusing on the success of this solution would help reduce the numbers of such people to a minimum level.

Code of Ethics Integrated in the Curriculum

Including sections in the newspaper (university or local) that talk about ethical situations that people previously dealt with, could be a solution for helping people to act ethically. Even though ethical dilemmas differ from situation to situation, reading this section could help many people have some perspective as how they should act in simi- lar situations. When reading a newspaper, most people focus mainly on the first and the last page, there such sections should be included in the last page. This small ethics column should clearly tell people what the problem is, who the stakeholders are, what possible choices the person had, and the future implications of his choice. This solution is one of great importance, because many people do not have the ability to recognize the different con- stituent of making an ethical decision, and it would introduce to people diverse acceptable choices for making an ethical decision. This solution follows the Deontology theory or Universal ethics theory because this solution wants to stimulate people at doing the right thing. This solution tells people what the right thing is regardless of the situation.

Immanuel Kant (19xx) believes that morals and the decision-making process can be self-learned or taught. He argues that we are capable of learning the moral law and application on our own behalf. On the other hand he disputes that the role of edu- cation may help in forming the “character traits” or: “disposition” but education cannot ensure the right application. (Moran, 2009). Teaching and

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Learning and Teaching of Ethics

training of ethics must cultivate and nurture the critical thinking traits, characters, and skills that are needed to be deliberated efficiently for ethical choices in professional and personal life. (Match- ett, 2009). Seminars and workshops should be the tools to teach and assist values that are already grasped from the surrounding, experience, right and wrong, good and bad and moral obligation, Hence, the importance of teaching ethics must be implemented; taught and learned in schools as early as kindergarten classes. Students should get engaged with ethical dilemmas and get aware of pinpointing the dilemma.

Given that the person’s ability to deal with moral issues is not formed all at once, and since every person have his own beliefs and perception, it is important to realize how every individual distinguish the right from the wrong choice. (“Bi- charaf”, 2009). Many employees become lost when it comes to “grey area”, they have tendency and intention to behave ethically, however there is ambiguity in understanding what ethics all about is. Thus, applying their perception while making a decision or choice is hard for them since they are unclear about what is considered to be ethical and what is not. For instance, code of conduct is hugely recommended as a primary solution to serve as an ethical reference yet never considered a cure. (Buhler, 1991).

Going back to the role of education in shaping our personality, students must concerned about their personal branding image It is a brief history about each personal acts and behaviors. Thus, if someone was engaged in unethical behavior his/ her name would long last with him. Before gradu- ation, universities for example can give them a certificate of conduct which will allow them to go for jobs. And in the recruiting process, ethical dilemmas should be raised during the interview or the assessment and must be integrated in the HR recruiting process. Thus, students must be aware of the short term dilemma versus their long term which is losing their credibility and trust from their fellows at school, university and certainly at work.

Ethics Teaching Starting from School Stages and Engaging Parents

The debate that was raised concerning teaching and learning of ethics morals and values was mainly related to the universities and colleges stage. There was no debate about teaching ethics at the school level especially at the intermediate classes For sure, teaching ethics as it is being taught at the universities will be extremely hard to school age children, so other simple ways should be used like multimedia and movies. More specifically, children may not realize that there is an ethical dilemma in the plot of the movie, but graded questions from teachers that focus on the ethical point will record it in their minds. Thus, later in the future they will understand it and realize the hidden morals. Thus, teaching ethics and learning it will be more interesting and effective where the correct concepts are being posted in the children minds, hence the solution start at a young age, which makes it easier. Moreover, since the children learn or mimic parent’s actions and thinking, it is recommended to engage the latter in the teaching process. Meanwhile, with parents’ participation, this will be transferred to the coming generation at minimal effort. For example grouping parents all together to share their ideas and showing them examples of the children behavior at the school and analyzing them will clarify and leave great influence on each other that could pave the way for having the good ethical morals starting with the family in the household setting.

DEBATING AND DECISION MAKING IN BUSINESS ETHICS

Classical Dilemmas in Business Ethics

A dilemma occurs when a hard choice has to be made in exclusivity between several options that all appear to be valid, each for a different reason

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Learning and Teaching of Ethics

as sustained by a different theoretical philosophy. Moral imagination can investigate, explain and even justify each one of the available options based on a well established philosophical theory. Such moral imagination can compare, weigh, and even combine various theories to help arrive at a conclusive settlement of a dilemma.

Most ethical dilemmas in business ethics fall in one of the following categories:

1. The long run versus the short run; 2. The individual interest versus the community

interest; 3. Justice versus mercy; and 4. Truth versus loyalty.

To simply say that observation will not of course solve the problem. What it really does, is help to clarify the debate. We can’t do justice to an ethical dilemma if we follow the policy of always choosing one side of the argument, regard- less of the particular circumstances. That is what the proponents of fixed or deep-rooted positions over social responsibility effectively do. Quite the opposite, the circumstances always matter. There is no easy excuse from engaging in the details of ethical debate, and making an ethical decision which unavoidably will not please everyone but which you and your company are prepared to stand up for. That is what Ethics require. And Business Ethics cannot demand anything less.

Rules and Regulations

1. Opening speeches should be SEVEN minutes in duration. a. (From 0 min-1 min General intro-

duction, 1 min- 4 min P.O.I*, 4min- 5min concluding opening speech).

b. Point of Information (P.O.I.): Arguments to be discussed; Why the party is for/ against, basically your reasoning.

c. P.O.I are not allowed to be given during the 1st of the last minute of the speech.

2. A bell will be rung after the expiration of one minute and six minutes. The bell will be rung again at seven minutes.

3. You are not allowed to interrupt the speech giver at any point during his/her speech. You can write down your rebuttal arguments on a paper and address them during the designated time.

4. During the Proposition/opposition side discussion time slot as mentioned on the agenda, the group members of both parties will agree amongst themselves what their rebuttal arguments will be against the op- posing party.

5. During the pro vs. opp. discussion, raise your hand in order to participate. (Only applicable to the participants, the audience will get their own time slot to participate).

Table 1. Debate timeframe

Time Frame Duration Task

9:30 – 9:35 5 minutes Rearrangement of the classroom

9:35 – 9:43 8 minutes Opening speeches of both parties (4 minutes each)

9:43 – 9:47 4 minutes Side discussion, internal for each position

9:47 – 10:07 20 minutes Open argumentation between the 2 positions

10:07 – 10:14 7 minutes Open floor for audience comments (one minute each)

10:14 – 10:20 6 minutes Closing speeches of both parties (3 minutes each)

10:20 Debate winner announcement

Agenda: Total session duration: 50 minutes.

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Learning and Teaching of Ethics

6. When you address any individual from the opposing party you must address them as Mr. /Ms. Speaker and not by their name.

7. Before you begin your counterargument towards the opposing party/individual, the prosecutor must allow you to, so wait until you receive a sign allowing you to begin.

8. Speakers must observe parliamentary lan- guage i.e. bad language is not permitted.

9. Do not insult the person; argue for the idea rather than the person him/herself.

10. Be careful to avoid leaving statements hanging in mid-air. If you say something important back it up.

11. Once the floor is opened for the audience, they are allowed to participate; however, they might not exceed one minute each.

12. The closing speech is done by both the opposition and the proposition parties and they must not open a new argument. The closing speech should wrap up their entire arguments.

13. The winners get a one point raise on their overall average in Business ethics, and those who gave opening and/or closing speeches get a guaranteed point regardless if they won or lost.

FUTURE TRENDS

“Some considerations such as moral standards and moral reasoning make a distinction between the two showing how one infuses the other. In the teaching of ethics there must be a sense of goal establishment via authentic contextualized ethics curricula. The issue of implementation within a standalone versus embedded ethics discussion within curriculum was noted. Clearly both have merit yet ethics discussions should pervade cur- ricula and be contextualized.” (Ryan and Bisson, 2011). Several factors affect business ethics education, namely students’ ethics literacy and ethical perceptions, students’ attitudes towards

ethical issues, ethics and personal actions, personal morality, religious and ethical business conducts. This is in addition to the impact of formal business ethics education as implemented in the university’s curriculum. Business ethics could be taught if a comprehensive formal and purposeful direction exists in an institution to make students internal- ize their perception of business ethics (Hejase and Tabch, 2012).

CONCLUSION

Certainly some people are better at tackling ethical dilemmas than others, but this is a talent, native or acquired, is based on wisdom and experience. To say that there is no ultimate perseverance of an ethical dilemma is not to say that a choice that we grasp is purely personal, or that we do not have a duty to make the best decision that we can given the conditions. The motives which inspire our final choice are motives which we can present to oth- ers, if requested to do so, and if essential, defend with strong arguments; though by the nature of the case such arguments are going to be less than indubitable. There is usually a time constraint on moral debate; when the time constraint runs out, you have to make your ruling, call and act.

REFERENCES

AbiSleiman, R.S. (Producer). (2009). Bicharaf business ethics roundtable.

Alam, K. F. (1999). Ethics and accounting educa- tion. Teaching Business Ethics, 2(3), 261–272. doi:10.1023/A:1009743030087

Bicharaf. (2009, April). Bicharaf publishes busi- ness ethics roundtable report for Middle East businesses. Academic Press.

Buhler, P. S. (1991). How can we encourage ethi- cal behavior?. Super Vision, 52, 3–5.

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Cavaliere, F. J., Mulvaney, T. P., & Swerdlow, M. R. (2010). Teaching business ethics after the financial meltdown: Is it time for ethics with a sermon?. Education, 131(1), 3–7.

Gioia, D. A. (2002). Business education’s role in the crisis of corporate confidence. The Acad- emy of Management Executive, 16(3), 142–145. doi:10.5465/AME.2002.8540396

Hamer, V. (2002, December 15). Can business ethics be taught?. The Chronicle Online.

Hejase, H. J. S., & Tabch, H. (2012). Ethics educa- tion. International Journal of Islamic and Middle Eastern Finance and Management, 5(2), 116–133. doi:10.1108/17538391211233416

Jannoun, R., & Sireen. (2006). The impact of kleptocracy on economic development the case of Lebanon. Department of Economics at the American University of Beirut.

Kant, I. S. (1889). Kant’s critique of practical reason: And other works on the theory of ethics. Longmans, Green and Company.

Kiss, E. S. (2000). Moral ambition within and beyond political constraints: Reflections on restor- ative justice. In Truth v. justice: The morality of truth commissions (pp. 68–98). Academic Press.

Klebe Trevin, L. S., & Nelson, K. S. (2011). Managing business ethics: Straight talk about how to do it right. Academic Press.

Kohlberg, L. S. (1981). The philosophy of moral development: Moral stages and the ideas of justice. San Francisco: Harper & Row Publishers.

Lantos, G. P. (1999). Motivating moral corporate behavior. Journal of Consumer Marketing, 16(3), 222–233. doi:10.1108/07363769910271469

McCabe, D. L., Dukerich, J. M., & Dutton, J. E. (1991). Context, values and moral dilemmas: Comparing the choices of business and law school students. Journal of Business Ethics, 10(12), 951–960. doi:10.1007/BF00383799

Miller, M. S., & Miller, A. E. (1976). It’s too late for ethics courses in business schools’. Business and Society Review, 17(Spring), 39–42.

Moran, K. A. (2009). Can Kant have an account of moral education? Journal of Philosophy of Education, 43(4), 471–484. doi:10.1111/j.1467- 9752.2009.00721.x

Ryan, T. G., & Bisson, J. (2011). Can ethics be taught? International Journal of Business and Social Science, 2(12).

Sims, R. R., & Felton, E. L. Jr. (2005). Success- fully teaching ethics for effective learning. College Teaching Methods & Styles Journal, 1(3), 35–41.

Sims, R. R., & Sims, S. J. (1991). Increasing ap- plied business ethics courses in business school curricula. Journal of Business Ethics, 10(3), 211–219. doi:10.1007/BF00383158

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KEY TERMS AND DEFINITIONS

Behavior: Individual action in everyday pur- suit towards the satisfaction of wants and needs.

Code: Set of detailed specifications regulat- ing performance and behavior towards achieving a set purpose.

Education: Consistent pursuit of knowledge production and exchange towards the building of intellectual assets within individuals operating in a society.

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http://dx.doi.org/10.5465/AME.2002.8540396

http://dx.doi.org/10.1108/17538391211233416

http://dx.doi.org/10.1108/07363769910271469

http://dx.doi.org/10.1007/BF00383799

http://dx.doi.org/10.1111/j.1467-9752.2009.00721.x

http://dx.doi.org/10.1007/BF00383158

Learning and Teaching of Ethics

Integrity: Consistence in behavior between intention and performance matching the walk with the talk.

Learning: Pursuit by an individual person in the acquisition of knowledge towards internalizing and integrating knowledge into everyday living.

Perception: Intent of action and image formed of a specific issue.

Teaching: Deliberate effort in the transmis- sion of knowledge skills and competencies aiming at the transfer of intellectual capitol within the explicit domain.

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Learning and Teaching of Ethics

APPENDIX

Learning Objectives

L.O.1: Describe the role of education in behaving ethically. L.O.2: Discuss the ability of teaching and learning ethics. L.O.3: List the reasons that highlight our need of ethics. L.O.4: Discuss business ethics in Lebanon. L.O.5: List the solutions for building ethical awareness in Lebanon.

Summary

Describe the Role of Education in Behaving Ethically

Education is one of the most consistent and powerful correlates to the development of moral judgment in individuals.

• Education builds theoretical and some practical basics for taking more effective ethical decision. • Educators influence students in their learning about business. • Education makes the minds of the students opened on considering ethics in every detail of their

business career. • Education validates, reforms, and expands the individuals’ perceptions and believes since there

are various sources of knowledge for dilemmas.

Discuss the Ability of Teaching and Learning Ethics

They claim that it is too late to start teaching ethics at universities because students were bombarded with huge set of values, that can’t be changed and that, ethics is not like science or math to be taught and learned, it is kind of concepts that are designed since the early stages of our life. Also, because at certain situations some people don’t see ethical problems as others do. . But ethics was learned and grasped in the past; it can be considered as continuous knowledge to be always taught and learned; it could be taught and learned in other way than teaching such traditional sciences However ethics teaching is possible because the aim to create certain skills and built the basics for promising wise thinking that is able to choose the better choice.

List the Reasons That Highlight Our Need of Ethics

• Global companies recognize that ethics is the essence of business hence it is crucial to integrate ethical values in their businesses.

• Companies cannot survive in isolation, the need to act socially. • Companies are no longer just competing for profit but also for reputation hence most of them are

recruiting and training ethical employees.

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Discuss Business Ethics in Lebanon

Researchers showed that Lebanese problem lies in the perception side of business ethics and not in the application. Lebanese people are primary concerned with the theory of profit maximization caring less to the ways that produce money The Lebanese culture is not aware of academic integrity and thus lacks the essence of business ethics to an extent were behaving unethically becomes a normal habit built in their culture and traditions.

List the Solutions for Building Ethical Awareness in Lebanon

• Building awareness in schools and universities by having ethics as a university requirement. • Integrate code of ethics in the curriculum by having a section in the newspapers about real life

story of an unethical behavior. • Continuous informative seminars and workshops. • Making ethical cases requirement in recruiting. • Ethics teaching starting from school stages and engaging parents too. • Increase the penalties of unethical behavior of the companies.

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Chapter 2

DOI: 10.4018/978-1-4666-7254-3.ch002

Utility, Duty, Morality, and Justice

ABSTRACT

Utility is the theory of the greatest happiness to as many people as possible. The end justifies the means where consequences matter and what makes the action moral is the result. Duty deontology implies that we are doing a good job as long as we are following the rules even if it is against our will. It is our duty, our obligation, even sometimes leading to pain. All actions and decisions should be of a good will regardless of the results. On the other hand, moral virtue is acquired by habit and does not come by nature. Virtue represents the mean between extremes. Therefore, moral virtue has to do with feelings followed by actions, where the mean is not always the middle of two opposite extremes. This chapter explores utility, duty, morality, and justice as philosophical foundations of moral imagination in ethical decision making.

INTRODUCTION

Sensations of pain and pleasure are part of a continuum. Pain and pleasure are extreme states of mind felt in our everyday life. These extremes vary according to the phase of living. By taking into consideration that the life lived is socially attached, family oriented, and lived in normal conditions. Extremes vary with respect to age, to style of parental orientation, and to way of thinking. Pain and pleasure reflect the result of every feeling or action faced, from the physical to emotional. Emotions, imagination, learning, motivation, and maturation are mainly the basics

of these states of mind. Where the sole purpose of business might be viewed as a financial maxi- mization of profit (Friedman, 1970), other more traditional philosophies dating back centuries, or even millennia, shed a more humanist light on the dilemmas of business ethics.

BACKGROUND: SIMPLE PLEASURES AND PAINS

Pain and pleasure are among main driving forces of behavior. Every intended action is driven by these two unseen forces in order to avoid pain and

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Utility, Duty, Morality, and Justice

to gain pleasure. The simple pleasures, accord- ing to Bentham, include the pleasures of sense, wealth, skill, amity, good name, power, piety, benevolence, malevolence, memory, imagination, expectation, dependent on association, and relief. Several simple pains can be listed as the pains of privation, senses, awkwardness, enmity, ill name, piety, benevolence, malevolence, memory, imagination, expectation, and dependent on asso- ciation. Utilitarianism was revised and expanded by Bentham’s student; John Stuart Mill (1850).

Sigmund Freud also added about pain and pleasure through an interesting article stating that we are born with a pleasure principle and that we will seek immediate gratification of needs, for which our bodies reward us with feelings of pleasure. And he also stated that the reverse is also true, and the pain principle says that, while seeking pleasure people will also seek to avoid pain. The pleasure-pain principle was originated by Sigmund Freud in modern psychoanalysis, although Aristotle noted the significance in his ‘Rhetoric’, more than 300 years BC.

The pleasure principle represents hedonism; the thought that life ought to be lived to the fullest and that pleasure should be sought as a main goal. Hedonists will engage in self-destructive ways through their extreme use of sex, drugs, rock and roll and other means of satisfaction. Pleasure is also linked to Jeremy Bentham’s (1920) ideas in utilitarianism, where the assessment of supreme utilitarian gain in pleasure is measured through sensible calculus. Pleasure and pain are basic prin- ciples in conditioning, where you tend to get more of what you reward and less of what you punish.

Pain may be more instant than pleasure, mak- ing people think more about the avoidance of pain, thus paying more attention to it. Anticipated pleasure and anticipated pain are nearly as domi- nant as the feeling itself as people think about the pleasure and pain that may happen later in life. It is questionable that these have had an important outcome on human development as they move us towards a more bearable life.

PHILOSOPHY OF UTILITY: CONSEQUENCES OF BEHAVIOR

John Stuart Mill follows the consequentialist theory (Parker, 1863). Consequences of actions make them either right or wrong. John Stewart Mill begins to question the goodness of something good in itself. We need to go deep into the basics and see how they apply to life situations, thus making it easier to accept or reject it. Utility is not only physiological. It can be as simple as having fun. He then defines three meanings of pleasure that are beauty, ornament, and amusement. He distinguishes beauty from ornament by the idea that beauty is in the eyes of holder; ornament is in the eyes of the creator.

The Proof of Goodness

The proof of goodness is not intuitive or impulsive, but it is rather subject of formal knowledge that is verified and tested. No definite proof is given in the “Utilitarian” theory. In order to prove some- thing is good, one must show that it is a means to something acknowledged to be good without proof. By the utilitarian formula there are two dif- ferent types of philosophers: ones who consider that utility is only the test of right and wrong, and others who consider that everything in life is referred to pleasure and pain. Both groups can be mistaken when they are extremists. Many writ- ers and philosophers are commonly falling into the mistake of opposing utility to pleasure at the time when the founders of the Utilitarian theory declare that utility is pleasure itself, along with the absence of pain. Thus, actions are right if they bring happiness, wrong if they cause the reverse of happiness; where happiness means pleasure and/or the absence of pain.

The Quality of Pleasure

Early on, utilitarianism was understood as simply pursuing corporal pleasures just like pigs.. The

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epicureans believe that human beings are capable of the same pleasure as animals, but a beast’s plea- sures do not sustain a human being’s happiness, because the latter is attained by mental pleasure, while the animals’ pleasure is purely physical. Humans and animals alike have the same ‘rule of life’, by introducing a general theme of the different hierarchies of pleasure that humans are capable of feeling. As the Stoic and later Chris- tian school of thought believed, pleasure attained through the intellectual, moral, or emotional realm of the human mind is much higher in value than pure bodily pleasures. Humans cannot be happy until their faculties are satisfied, and this means beyond the mere physical. The value aspect of pleasure separates it into quality and quantity. If one has experienced both, disregards moral obligations and chose one of them then it is the desirable pleasure. Then the criterion to choose between pleasures considers quality as higher and more reliable.

Utilitarians have taken one extreme in mea- suring pleasure, considering quantity as the only reference of measurement. If we want to know which action gives more pleasure than the other, it will be that which the majority of people agree on, irrespective of action’s moral aspect. Quality should also be considered. Between two pleasures a person will choose the one which brought more satisfaction. A person who has more pleasure will suffer more; nevertheless, he would never consent to be inferior unless he is extremely unhappy. Humans’ refusal to be leveled with animals relates to love of liberty, pride, personal independence, power, excitement and above all the sense of dig- nity. Humans’ utility is relative. Someone who did not experience a certain good will not know what he is missing. Anything that conflicts with dignity cannot be considered other than a momentarily object of desire. Humans choose the nearer good, whether it turns out to be the less valuable or not. Individuals who choose lower pleasures do it by selection and enthusiasm; they do so because they

are unable to reach higher pleasures. Our ability to seek higher levels of pleasure is limited by our position in life and the society we live in.

People would never agree to be less than what they are just to have pleasure, but very few might reach a point of unhappiness that they become willing to give up their life and status in exchange for another person’s feelings of happiness. When human beings are given access to all kinds of pleasures, they will choose those with higher facul- ties, even though they might suffer more; because they prefer to maintain their dignity. People with higher faculties are less content, because they have a deeper sense of the limitations of the world. Men “often postpone higher pleasures for lower pleasures” out of the weakness of their character. As people advance with age they become more likely to enjoy the lower pleasures, because they are the only ones they can any longer enjoy. The only way one can measure or decide which pleasure/ pain has a greater quality is through experience. One is qualified to judge and compare between two pleasurable (or painful) entities if he/she has felt and experienced them both. Pain and pleasure are two dissected entities that cannot be confused, but can be felt at the same time. The Greatest Happiness is the altogether amount of happiness associated with the person in addition to that of other people who are in contact with that person who are gainers by this happiness. The greatest happiness principle is to have many pleasures and minimum amounts of pain for all.

Greatest Happiness Principle

The best way to judge the quality of a pleasure or the intensity of a pain should happen through the admission of the feelings and opinions of those who had experienced both sensations. Noble char- acters (pride, dignity, justice...) must be nurtured in each individual and then shared among them in an attempt to benefit everyone and to make the world a better happier place. Greatest Happiness

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Principle is defined by the utilitarian opinion as being the ultimate end of human beings, as it is also the standard of morality. This principle is not only applied to mankind, but to all sensible creatures.

The theory of happiness states the ends or targets that are pleasure and prevention of pain, and that unhappiness is simply the reverse. Util- ity theory maximizes happiness to most people, yet it can’t satisfy all people. He thinks that those end points are the only targets that people aim for, and that everything humans do serves to satisfy those ends. This higher end of pleasure and lack of pain is considered a noble pursuit and desire, is designated as a philosophy that promotes material wellness of humans over the moral and intellectual wellness. Utilitarian theory appears worthy of pigs which signifies that animals experience a level of pleasure and pain.

PHILOSOPHY OF DUTY: WILLINGNESS TO DO RIGHT

Immanuel Kant follows the deontology theory (obligation theory). In disagreement with utility theory, consequences don’t determine the righ- teousness of actions. The most important thing is a good will, which is motivated by duty (Kant, 1907). Furthermore, some qualities that constitute a good will and are part of the intrinsic worth of a person should not be called good without qualifica- tion, because if they lack the principles of a good will they may become extremely bad. Therefore, a good will is good in itself, not because of what it performs or what ends it reaches.

Rules of Nature

For the attainment of happiness an organized adapted being follows the rules given by nature. By doing so, one might also scarify his welfare for the wellbeing of society. When a person uses reason to reach happiness, he grows further away

from satisfaction. The will is what pushes a per- son to do a certain action. While reason (logic) is necessary it is not as strong and influential to control our actions and lives. We are created in a certain way that even without reason we find ourselves spreading joy and interest. This act is due to honoring one’s self. Another important thing about the creation of man is the special gift of patience and sympathy that nature has provided.

The Duty to Be Happy

We all have the intimate tendency to be happy, and all our pleasures are combined in one higher pleasure which is happiness. If someone has the duty to be happy, it is the worth of others; which means if you cannot be nice to others, you cannot be nice to yourself. It is the practical love that can be commanded, that is even though all our senses and inclinations may oppose this feeling and sometimes tell us to hate instead of love, we love just because of the command of duty. In ad- dition, actions that take place out of sense of duty have moral value from the will to the action and not from the purpose. These duties are governed by law rather than inclinations, whereby this law may be good in itself that it imposes a will towards abiding by it irrespective of personal inclinations.

Universal Maxims

The good is not the effect of a certain action. It is to what extent the action is good in itself and respects social law. The reason of men always has in view that human maxims should become uni- versal laws. The maxim here is about extricating ourselves from false promises (Hartman, 2011). In this case it’s not more prudent to make our laws and maxims universal but instead we should make it a habit to make no promises unless we’re intending to keep them. Duty should be admitted by itself by every person and should be applicable all the time because it could serve as a universal law for the wellbeing of mankind. Therefore, in order to

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determine whether a maxim could be respected as a principle and become a universal legislation, its worth must outweigh the worth of what desires and inclination dictates. Thus, law is respected as duty, and its worth will be the highest.

PHILOSOPHY OF MORALITY: MORAL ABSOLUTES MUST BE LEARNED

According to Aristotle (1941), moral virtue is acquired by habit, does not come by nature. He focuses on the learning of which actions of man should be performed in order to become good. The soul is defined by three qualities: capacities, habits and passions, which are feelings that lead to pleasure or pain. Virtue lies in the middle ground between two extremes such as moderate anger. We are labeled good or bad according to our virtue and vices. Meanwhile we tend to move by our pas- sions. The excess and defect of things belong to vice, but the mean state of things belongs to virtue. We are bad in many ways, but we are good in one way only. Therefore virtue can be considered as getting accustomed to moderation. But this virtue isn’t found in all actions since some actions are bad for themselves, such as adultery. There is no context that justifies committing sin. Moreover, there is no mean to wrong actions.

Aristotle realized that the lure of pleasure and personal styles makes it difficult to choose mod- eration, and human nature tends to take extremes. The excess of anything can lead to destruction. Finding a middle ground for doing things is the best way to live. Virtues are intellectual or moral. The excess or defect of any action human beings peruse destroys virtue. Being in the mean preserves virtue. Moreover, it is not only important to know what virtuous actions are but also how to perform them. Having intentions in choosing to perform just or temperate actions doesn’t matter unless those actions are really performed. For the act itself, is the important part rather than intentions. Virtues

must be in relation to the propriety of time and manner. Also, virtue is supposed to be in relation to pleasures and pains. In resisting pleasure we reach excellence. Good balance of pleasure and pain makes virtue.

The Golden Mean of Two Extremes

He points out virtue is the mean of two extremes, one of defect and one of excess. He believes the mean is the correct action. Virtues represent the mean between extremes. A good action is not enough to be virtuous, there are two other conditions: First, one must know they are doing a virtuous act not by random accident). Second, the action must be chosen for itself because it’s good. The most important example of two ex- tremes is pain and pleasure on which we base our actions and that are relative to our everyday lives. However, we should know how to deal with pain and pleasure properly. Therefore the proper use of them explains what virtue is. Justice and temperance are virtues that people acquire by performing just and temperate acts on a frequent basis. More importantly, it is by acting that we can become just and temperate, rather than only listening or thinking. Moral virtue has to do with feelings followed by actions.

Virtue is an act of deliberate preference. Ti- midity and quick anger are the two extremes of a segment. The middle point of this segment is patience. Since the middle point doesn’t have to be in the exact middle of the segment, patience tends to be closer to timidity than to quick anger. Thus, patience is the golden mean instead of the middle of the segment. If the two extremes were evil and good or wrong and right, we should always look for the golden mean: when we are leaning towards evil, we should push ourselves in an op- posite direction than the usual one so we could get closer to the golden mean which makes us happy. But, Aristotle says that being angry towards the right person to the right extent at the right time for the right reasons in the right way is not easy

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to achieve. So, it’s hard to find the middle point or golden mean between two extremes. Aristotle explains that some things are bad in themselves and not in their excess or defect. For example, a person cannot commit “a little of” adultery. They have either committed adultery or they haven’t. So in cases such as these, the mean state in itself is an extreme. Thus it would be absurd to search for a mean state of an excess or a defect because we would be going after the excess of an excess or the defect of a defect. He gives examples of some habits and their mean state. He talks about fear and confidence which are extreme states and says that courage is the mean between these two. He then talks about pain and pleasure and that temperance is the mean state. Later, he talks about liberality and prodigality that are to opposite extremes. At the end he talks about honor and dishonor and ambition and the lack of ambition. He claims that the mean isn’t always the middle of two opposite extremes. When someone is deficient to shame then he is impudent. Indignation is the mean state between the envious and the malevolent. For Aristotle the mean state is the best choice but it is difficult to achieve.

Measuring Virtue

The scale used for measuring virtues then can become relative. For example: ambition can be either a virtue or a vice. It’s easy to find a mean between an extreme and a defect, but what is dif- ficult is finding a balance between two extremes on the same side. Whether on the passionate ex- treme, where modesty stands as a mean between a bashful and an imprudent person, or on the defective extreme, where indignation stands as a mean between envy and malevolence. Fear and confidence are two extremes, and courage is the mean state. In case of pleasure and pain, temper- ance is the mean. Those who are in the insensible state live in pain, and refuse to smile and laugh. On the subject of the giving and receiving of money, liberality is the mean state, illiberality the

defect and prodigality the excess. On the subject of honor, magnanimity is the mean, the defect meanness of spirit, the excess vanity.

A distinction is made with regards to the rela- tionship between the two extremes and the mean state. When compared with the excess, the means is in defect, and when compared with the defect, the mean is in excess. Human nature tends to be more biased toward a certain extreme than the other, and thus humans need to restrain themselves and try to be at an equal pace of both extremes, and try to find the appropriate mean. Therefore we must always seek to hit the mean despite our personal inclinations. So a person must know the extremes, and focus on escaping them towards the mean with the least amount of error.

The Golden Rule of Ethical Behavior

Do unto others as you would have them do unto you. Behave with others as you want them to behave with you…(Ghyllier, 2008).

• Buddhism: Harm not others in ways you would find harmful to you. Udana Varga 5:18.

• Hinduism: Total duty to avoid unto others that which would cause you pain if done unto you. Mahabharata 5:1517.

• Islam: Do Not Be Angry, Hadith of the prophet.

• Christianity: All things that men should do unto you, do even so to them. Matthew 7:12.

• Judaism: An eye for an eye …

Awareness of Implementing Ethical Behavior

Examining the golden rule of ethics and the other extreme of it, makes you realize why it is important to act ethically. When the person starts “Treating others as he/she would like to be treated”, he/she becomes, socially responsible and more caring

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Utility, Duty, Morality, and Justice

for most of the stakeholders and the consequences of the decisions. Yes, it is so hard to have all the people acting the same, but acting unethically is not the solution. As we know following the majority does not always lead to a correct track; thinking, studying, and deciding for ourselves based on certain facts could lead to a better path to follow. In addition there is no doubt that if at least the majority follows the golden rule, the whole world will be in better position. On the other hand, could you imagine where will we be if everyone “treat others as he/she wouldn’t like to be treated”? Simply human life will look like the animal forest where each one is seeking his/her needs even at the expense of others. Meanwhile, the ones who follow this extreme will get affected negatively by the actions of others but the ones who follow the golden rule will get affected positively by others if they follow! Therefore, acting ethically is important and a must. However, it is not easy to have all the people applying or thinking in similar ways. Yes, they are aware of the importance of ethics, because they disagree on being treated unethically, but to a certain threshold. I mean that they feel it is easier to achieve certain goals by being unethical, like taking a bribe to increase income, but they are not really aware of its long term consequences. Fortunately, especially after globalization and the level that corruption has reached in Lebanon, NGOs and education orga- nizations are starting to play a significant role in raising that awareness.

FUTURE TRENDS

Individuals do have a sense of duty and sense of what is right and what is wrong from an ethical perspective. There is a need for a code of ethical practice (CoEP) in business to encourage indi- viduals to apply their sense of duty at employees or management (Mc Nutt, 2010).

Moral values are values may be derived from wider elements, and moral choices are such that they should be expressed in principles that transcend special times, place, or special pleading. There is an expressed need for consistency of approach (Massimo, 2012).

REFERENCES

AbdelSater-AbuSamra, N. S., & Bishara, N. D. (2006). The Lebanese code of corporate gover- nance. The Lebanese Transparency Association.

Achbar, M. S. (Director/Producer), Abbott, J.S. (Director), Bakan, J.S. (Writer), & Simpson, B.S. (Producer) (2004). The corporation [DVD]. Canada: Big Picture Media Corporation.

Aristotle, . (1941). Nicomachean ethics (W. D. Ross, Trans.). New York: Random House.

Bentham, J. S. (1879). An introduction to the prin- ciples of morals and legislation. Clarendon Press.

Caux. (2009). Caux rountable: Principles for responsible business. Author.

Eichhoefer, G. W. (1995). Enduring issues in philosophy. Greenhaven Press.

Friedman, M. S. (1970). The social responsibil- ity of business is to increase its profit. The New York Times.

Ghillyer, A. W. (2008). Business ethics: A real world approach (Int. Ed.). McGraw Hill.

Hartman & Desjardins Business Ethics. (2011). Decision making for personal & social respon- sibility (2nd ed.). McGraw-Hill.

Kant, I. S. (1907). Morality is governed by will- ing to do right: From, fundamental principles of the metaphysics of morals (6th ed.; T. K. Abbott, Trans.). London: Longmans, Green & CO.

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Utility, Duty, Morality, and Justice

McNutt, P. A. S. (2010). Edited ethics: Corporate governance and Kant’s philosophy. International Journal of Social Economics, 37(10), 741 – 754.

Mill, J. S. (1991). Collected works of John Stuart Mill (Vol. 33). University of Toronto Press.

Nardo, M. N., & Francis, R. D. (2012). Mo- rality and the prevention of corruption: Ac- tion or intent – A new look at an old problem. Journal of Financial Crime, 19(2), 128–139. doi:10.1108/13590791211220403

Son, D. P. S. (1863). Morality is governed by consequences of behavior. In John Stuart Mill utilitarianism (pp. 209–217). London: Academic Press.

KEY TERMS AND DEFINITIONS

Deontology: Philosophy of education rational- izing the behavior of ethical achievements within the moral imagination space.

Duty: Self sustained discipline in the delivery of tasks and associated results based on a perceived philosophical value.

Golden Rule: Universal approach to be- havioral exchanges between individual humans formalized by all known existing religions and philosophies.

Justice: A system of law implementation formalized in a society utilizing mechanisms of enforcement, courts, penal codes, police.

Morality: Regulation of behavior based on individual consciences, innate values and acquired culture.

Utility: A measure of satisfaction as perceived by the human mind upon the satisfaction of needs and desires and based only on the consequences of action.

Virtue: Socially approved value system regu- lating the distinction between right and wrong.

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http://dx.doi.org/10.1108/13590791211220403

Chapter 3

DOI: 10.4018/978-1-4666-7254-3.ch003

Abuse of Power

ABSTRACT

The person that abuses power finds him or herself facing a dilemma. That person must choose between gaining benefits at the cost of harming the person they are abusing or self-restraining their handling of power and avoiding harm to others, as they sacrifice any possible gains or enduring a reduction in per- sonal benefits or even oftentimes a loss. Fear of unemployment makes workers generally want to protect their jobs and definitely avoid any confrontation with their boss, which may lead to enduring power abuse in silence. The abuse of power practice is common, since managers have the opportunity to take advantage of their subordinates for their own benefits. What really varies is the level of acceptance and the treatment that must normally include means and ways of protection and punishment. This chapter explores abuse of power.

INTRODUCTION

Abuse of power is the act of using one’s position of power in an abusive way. Abuse of power may be realized where hierarchies present; in govern- ments, in economic systems, in the workplace, and in families. Power can be defined as the ability, or capacity to exert one’s will on others by virtue of their social position, physical strength, wealth, technology, weapons, or trust that others confide in the person.

Power abuse is usually under-reported. In fam- ily owned firms meaning that there are favorable chances for a normal employee to be directly supervised and monitored by the owner of the company who control punishment and appraisal.

BACKGROUND

When you were made a leader you weren’t given a crown. You were given a responsibility to bring out the best in others. For that, your people need to trust you. And they will, as long as you demonstrate candor, give credit, and stay real. – Jack Welchf

ABUSE OF POWER: DEFINITION AND DILEMMA

Abuse of power is a phenomenon that has existed since people have occupied positions of power. While the nature of man, whether good or evil has been constantly debated, there is no doubt that those in positions of power have tended to abuse

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it more frequently than should happen. Abuse of power is not apparent in just one period of time or in one region of the world, but throughout both, and in hundreds of varying degrees and contexts.

In order to define it, we must define its compo- nent terms individually and outline the situations in which it may exist. Power can be defined as the ability, or capacity to exert one’s will on others by virtue of their social position, physical strength, wealth, technology, weapons, or trust that others confide in the person. The abuse of power would then occur in the situations where this power is unjustifiably or improperly used to exploit or harm other, or through lack of taking action, allows for exploitation and harm to occur. Given this explanation, it becomes apparent that with any ethical dilemma, it is extremely easy for there to be a component that has to do with the abuse of power, often in the business world, it is the abuse of power that brings forth an ethical dilemma for others. Even in cases where there is an issue of truth and loyalty, or justice and mercy, they are frequently the results of someone transgressing a boundary that they should not have, and this can only be done through the abuse of power, or trust that they have. Environmental issues can even be considered as examples of abuse of power, whereby the corporation that has the ability to stop harming both people and the environment, does not. That is to say, almost any issue contains and element of abuse of power.

In the developed countries there are laws and regulations that have existed; these regulations in their present formula provide merely for straight- forward principles of the veracity and transparency and an enormous challenge rests in emerging these principles to discourse the explicit features. Yet In Lebanon, major monopolies are a very good example of abuse of power. The suppliers of elec- tricity via private generators are a lucid model of abuse of power through monopoly in almost all Lebanese territory. For some people, power can be a real power trip. They enjoy the feeling of control over both people and information. That

is why they tend to keep secrets, hiding much of their thinking regarding people and their perfor- mance, and reserve their knowledge about the company and its future. But it drains trust right out of people. You know that old saying “The fish rots form the head”. It’s mainly used to refer to how politics and the abuse of power filter down into an organization, but it could just as easily be used to describe the effect of a bad attitude at the top of any team, large or small. Eventually everyone’s infected.

GENERAL HISTORY

Outside of the business world, there are thousands of examples of power abuse all throughout history. Nero burnt half of Rome when he believed that there was a plot on his life. The great pharaohs of Egypt portrayed themselves as gods and were worshipped solely because of their position. The conquistadors used their superior military skill and technology to conquer and suppress the Az- tecs. Henry VIII of England broke away from the Catholic Church and beheaded all who opposed him to secure a male heir to the throne. Abraham Lincoln suspended Habeas Corpus and rendered the American constitution useless. Mao Zedong, Stalin, Hitler, Mussolini, all oppressors, using whatever they could to benefit their own party and country above all else. Nixon and Watergate scandal as well as McCarthy and the red scare also are all examples of abuse of power. While these may be the most flagrant cases, abuse of power can exist on a much smaller and less visible day-to-day scale.

When it comes to abuse of power in a business context, the abuse of power has been intricately linked to historical events in each era. In the 1960’s and during the Vietnam War a strong anti-war sentiment existed leading to many employees hav- ing adversarial relationships with their employers. At the same time in the US, the war for African American civil rights was still being waged, further

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adding to the existing tension. The impact this had on business ethics is immense. Abuse of power was extremely frequent during the civil rights movement, both in and out of the business context. In response, corporations addressed ethical issues through legal or personnel departments, another area where the abuse of power could easily occur.

During the 1970’s defense contractors and many other major industries are riddled by scandal as the US economy suffered through a recession and unemployment became extremely high. This era saw the worldwide resurgence of human rights issues, and as a result, the abuse of power. These are issues that dealt primarily with forced labor, substandard wages and unsafe practices. In the decade following that, businesses began to evolve more thoroughly; corporations downsized, health care issues are brought into light, but at the same time employees’ attitude about loyalty to the em- ployer are eroded. With such developments came increasing instances and possibilities of power abuse. During this time period bribes and illegal contracting practices were rampant as well as the peddling of influences, that is to say the selling and trading of one’s influence to make better deals. More so, the 80’s saw the beginning of deceptive advertising, financial fraud and transparency is- sues, all of which are intricately related with a position of power being taken advantage of.

With the 1990’s the world saw globalization and increased expansion that brought about new ethical challenges regarding the abuse of power. Major concerns regarding child labor arose, as well as increasing environmental issues and many related to bribery and facilitation payments. Major ethical dilemmas regarding the abuse of power and unsafe work practices in third world countries arose, leading to several boycotts and many awareness campaigns6. Increased corporate liability was also an issue, as the case with many cigarette companies and Dow Chemical for ex- ample, who abused their power of having superior wealth, technology and influence both to cause harm and as an escape method thereafter.

From the beginning of the new millennium until today the ethical climate has changed greatly. Especially following the recent financial crisis that left several corporations and their thousands of employees penniless, the problem of financial mismanagement has become something of great concern, and one intricately tied to the abuse of power; for it is CEO’s abusing the trust that the shareholders have in them that leads to such mismanagement. Another development related to the abuse of power that is unique to the new millennium is cyber crime and privacy issues. Corporations now have a new arena where than can exert their technological and monetary advantage to gain knowledge about consumers without the consumers knowing; a clear ethical transgression that is permitted by the power of the corporation in of itself.

Since the ancient history till nowadays the abuse of power has been present at all times and with all civilizations. The history is full of cases of kings, emperors, army leaders, governments who used their presence in power to abuse their enemies as well as their own people. Take for example the ancient Egyptian Pharaohs who con- sidered themselves the ultimate power on earth, they forced thousands and thousands of their slaves into building their tombs (the great pyramids of today) causing them lots of suffering and death only because they thought they were immortal.

The abuse of power in the recent history can be seen in the way the present-day United State of America was built, by killing, moving, and relocating the native Americans who did not have the power to defend themselves against the more developed weapons their enemies had. The Trail of Tears is one of the most famous genocides in history. One act of the abuse of power that its consequences are still affecting the Middle East and the word now, is the occupation of Palestine. The abuse of power is not restricted to politics and wars, it is also present in business taking different forms, depending on the time where the act of abusing is taking place. In the past, busi-

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ness owners (like farmers) forced their slaves to work for free, and even when the slavery ended the abuse of power in business continued. For example in France they use to force children to work in different industries for a very low pay if any. They used their money to abuse the kids in need to develop their business and make profits.

Today we see new corporates going more toward encouraging team work and integrated business, instead of the traditional hierarchy, and as more and more regulations are being is- sued in an attempt to prevent the abuse of power in business. There will always be a way for the men and women in power to use their authority in the wrong place, especially with the presence of motivated and ambitious employees who are willing to give up a lot, in order to fulfill their dream of owning the power.

Abuse of power has a universal definition but what actually differs from region to region is how it is being practiced, where and in which field. The abuse of power is widely observed in Lebanon as in most developing countries, especially in the places that are still recovering from long internal combats where the lords of war were ruling and taking advantages of all resources they forcibly grab for their own benefits. However this does not eliminate the fact that sorts of Abuse of Power do exist in the developed countries that are far beyond the third world in applying and respecting of laws.

It is almost the same in other developed coun- tries as we can sense similarities in realities and mentalities. The laws are barely applied and the rates of unemployment are high which also thrusts employees to stick to their jobs and avoid con- frontations with their managers who sometimes extremely take advantage of their authorities and invoke violations.

This isn’t the way such violations are treated in the developed countries. Laws are strictly applied and obeyed in a way that similar behaviors are to be seriously abolished and penalized. Despite the existence of little corrupted communities, breeches however still exist even in well structured and

healthy environment as they’re all depending at the end on the violated employee’s decision. It is not always right to blow the whistle or to be quiet, but each case has its own facts and each person has its own perception. Many interrelated case studies reveal and expose what these employees are facing as dilemmas of deciding among two choices mostly accruing bad side effects.

Although stealing other’ ideas is not accept- able in all countries, similar abuses are favorable to happen every day and everywhere because at the end human greed is universal. This type of violation is happening in every country despite the variations in many levels among each that are behind the deviations in judging this behavior. There are still some places where such thing is not considered wrong and here lays the major problem.

THE DILEMMA STORY (TRUTH VS. LOYALTY)

The following story is happening every instant all over the world. It is a common case that clearly exposes the frequent practice of abuse of power at all levels of business. This little tale will shed the light on managers who are taking advantage of their seniority power in order to violate the copy- right of their subordinates and steal their ideas. It happened actually in an advertising agency when the creative department manager was in charge of preparing a very creative ad that should amaze a very important client who’s dealing with the company for the first time.

The department was formed of three employ- ees in addition to the manager. When they were gathered for brainstorming, a clever employee has threaded an amazing idea for the ad that was admirably appreciated by all attendance. The manager has had another idea that was good as well but he suggested exposing both ideas during the second meeting with the customer.

The department manager is only allowed to attend the meeting with the customer as he’s

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representing the whole creative department. The two ideas were presented and the clients were deeply astounded by the employee’s idea and strongly declined the department manager’s one which they somehow appraised it as of-subject advertisement. Nevertheless they decided to go further with the chosen idea and settled another meeting to do the fine tuning.

After the meeting, the general manager addressed the department manager aside and expressed how much he adored the concept and informed him that he will financially reward who was behind it. The department manager replied then that he has come up with the winning concept but his team who lack experience and perfection were proposing the other idea that was rejected by the customer but he wanted to present their sug- gestion as an appreciation for their effort and since they all approve on it. The department manager has gotten a raise on his salary and granted with the total confidence of the General Manager but kept it confidential and top secret so he did not inform his team members about it.

When the idea’s owner got the news, he was shocked at first but he immediately conferred this matter to his department manager, who claimed that such reward is meant to be for the whole team who were working as an intense unit. He also stated that the guy will be his right successor as the department manager for what knowledge and creativity he possesses and that he is a crucial necessity to the team and to the whole company which will definitely gain more important custom- ers due to his collaborations.

The employee felt more self-actualized as he got verbally rewarded by his direct manager but he thought he had to tell the general manager the whole story. He knew that the GM trusts his department manager and loves him, so telling the truth might drive him out of the company, which then would be detrimental and hurtful for the team he belongs too and to the whole company and for himself alike at the personal level. He might be

either appraised or punished for telling the truth but if none has occurred then he will lose his manager’s trust and his colleague’s respect. This shed light on the dilemma the employee is facing, he really wants to tell the truth but he also prefers to be loyal to his manager and his company. Tell- ing the truth might not be beneficial for him and vice versa but in all cases he won’t gain again the trust of his manager and his colleagues.

Abuse of Power in Lebanon

Numerous into-subject stories happen every day in Lebanon but little to none are heard via media or broadly discussed as these things are consid- ered to be normal majorly. 80% of Businesses in Lebanon are SMBs due to the constraints raised due the small size of the Lebanese market. The majority of these companies are family owned firms which states in a way how many direct man- agers are supposed to be the owner of the place where they work or in a very close relationship with the proprietor. There are favorable chances for a normal employee to be directly supervised and monitored by the owner of the company since the hierarchies in greatest part tend to be flatter.

In the same context, the punishment and appraisal systems in the Lebanese firms seem directly monitored by the owner of firms who are commonly supposed to be the direct managers for their employees. As the unemployment rate is high, the worker in the Lebanese companies generally tends more to save his job and he will definitely avoid any confrontation with his boss which may probably lead him out of the place. This unfortunate reality created ‘gods’ instead of managers at least in their opinions and in the eyes of their subordinates and pave the way for critical violations where stealing the subordinates’ ideas may be one of the simplest infringements comparatively.

Regrettably, the Lebanese Labor Law does not refer to similar conducts or settle any associated

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punishments. Although Lebanese judicial system condemns such violations in a way, however very little cases were moved to courts due the facts mentioned earlier.

Abuse of power has existed in Lebanon since before the civil war; it is a problem that can be linked to the political dynamics of this country. The political system in Lebanon can be described as “one of power-sharing between the elites of different confessional communities”, where these elites run the country in such a way that they exchange favors that don’t necessarily have to deal with monetary gain alone. Furthermore, the whole country’s stability is dependent on their actions since they continuously try to have the greatest power over the voters and influence their behavior. The government is influencing the country’s economy negatively when it acts in its own interest and shows the public that profits can be made through abuse of power and manipulation of the market and so they encourage the people to participate in this unethical type of action to also profit from this situation.

The Civil War was a main contributing factor to the increase of abuse of power in Lebanon. The ruling elite were weakened as a result of the conflicts that occurred during the war especially since Lebanon became a place where big powers such as Russia and the USA were fighting by proxy. Consequently, this caused instability in the country and loss of control by the local gov- ernment which gave militias and political parties the chance to replace the people that were ruling and manipulate the market to their advantage and examples of such abuse of power were when these groups took power over ports and airports in such a way that they were controlling the country’s economy, “corruption became the rule rather than the exception”.

After the war ended, warlords of militias had to be integrated in the political system of the country and were given some of the highest po- sition in the government. This meant they could

keep the privileges they acquired during the war and all this would of course mean that corruption would keep growing in Lebanon and the govern- ment became more about gaining power over the country than serving its citizens. In addition, it is a well known fact that in this country there are no means of controlling public officials and re- ally monitoring their work since perhaps the only people that are checking on officials are other officials, according to a World Bank study done among Lebanese expatriates in the year 1995, “there is a perception that corruption has become institutionalized in networks of protection, beyond the law, for self-dealing, bribes and the bartering of favors and influence.”

Many public institutions and politicians are very corrupt to the extent that it is making it more difficult for the country to recover from the effects of the civil war. Official are using the powers that are given to them by the people for their own personal gain in ways that will only harm citizens who are suppose to be benefitting from public funds and services. This is surely the reason for the public’s loss of confidence in politicians as well as a matter that will discour- age investors from putting their resources to the growth of the country.

It can be said that politicians’ abuse of power in Lebanon has existed before the civil war oc- curred and it also continued to take place during and after the war. This corruption has created a state where the people have no confidence in the system of their country and so they do not rely on the government to help them when they are in need so sometimes citizens take matters into their own hands which causes even more instability in the country.

After the war ended some there have been some attempts to fight the abuse of power that was happening within the government by Civil Society Organizations as well as by some state officials themselves. Parliament passed laws that had the objective of prohibiting acts of abuse of

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power and would require public officials to make information about their personal assets available at the Central Bank of Lebanon2. Also, there was some effort put into creating a committee that would be in charge of creating a strategy to fight corruption in Lebanon but it was never ac- complished. Furthermore, we cannot forget the initiative of local newspapers and media to expose activities that they find to show that officials are abusing the responsibilities they are in charge of for their personal benefit.

In May 1999, the Lebanese Transparency As- sociation was founded as an organization that has the goal of fighting corruption in both the private and public sectors and encouraging the value of transparency in Lebanon as well as stressing the importance of youth awareness and corporate governance.2 The people who decided to start this association were all aware that it would be in the best interest of society if actions were taken to stop the abuse of power that was going on in Lebanon.

So although we have seen some legitimate attempts to try to fight abuse of power, the effort that public officials make still seems to fall short and never really changes the reality of corruption in Lebanon. In the end we are left with a few civil society organizations and media sources that take it upon themselves to try to expose any politicians as well as people in the business world, by doing so they hope to promote transparency in privately owned companies and in the public sector.

Related Event

Most of university graduates are filled with great ambition and enthusiasm immediately after gradu- ation; they are optimistic by looking at a perfect world. Unfortunately, although people like to work at a cooperative environment, unpleasant events and mismanagement can destroy ambition and motivation. Many bosses don’t give credit where credit is due. Immediately after graduation Wil- liam found a job in a good financial company and he was so energetic and ambitious.

After spending few time in the firm he started to bring in plenty of ideas of how to improve the business process within the company and the way the everyday work is being done. He suggested new systems and work flows that decrease the time, effort, and cost of doing business. He pre- pared a detailed plan as per his boss’s request and presented to the manager so he can advise back or add up his recommendations. However, when the boss saw the structured and well-planned documentations, he frankly, felt the need to steal these ideas and refer them to him.

William had a good feedback after meeting his boss who told him that he’ll pass the project to the upper management so they can reveal the benefits beyond it and approve on it. The next day William heard shocking news while he was taking his morning coffee. The project he has prepared has gotten approval which was leaving a good impression on all the employees who were referring this tremendous work to his boss and appreciating what he has done and would do to enhance the work process and profitability. He decided to confer this matter to his direct boss who told him that he is being congratulated as he’s the head of the department and that all his team will be rewarded.

Week later he got surprised when he saw his boss moving to a new office which was larger than the old room and got finally sure that his boss has gotten all the associated bonus when no extra amount had been added to their normal end of year incentives. His only choice now might be to proceed working for the boss who is an idea- stealer. Being just a subordinate, it may be risky to protest, especially that he is still new and his boss has spent more than a decade in the company. The upper management will definitely take his boss side and he’s risking then to lose the job he has always dreamt of. He thought that other ways of dealing with the situation might not make it better.

As time passed William found out that his boss could never establish trust by giving credit where credit is due. His boss always steals ideas

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and claims them as his own. In bad times, he never takes responsibility for what’s gone wrong. In good times he never passes around the praise of his team. When the team excels he easily says “look at what I’ve done!” and only give credit to himself. His boss is considered an example of the kind of person who abuses his authority and relish the feeling of control over people and information. William is always hesitating between choosing to tell the truth or to remain loyal to his company. This dilemma will remain a companion for Wil- liam as long as he is working at this company and under his boss supervision. He is deeply thinking of the best manner to get rid of it but he is hoping that time might solve this matter especially that he is the right candidates to replace his boss. He is also wondering whether he will do the same as his boss is doing when he took his place.

Abuse of Power at a Global Corporation

One of the most notorious cases of power abuse is the example of a global corporation CEO. In 2003, after 18 years of being CEO at global corporation, he resigned from the board in protest against bad governance practices. These governance practices were what lent him the opportunity to remain as CEO for so long.

The President was the nephew of the original founder and the company’s largest individual stockholder. His resignation was due to the fact that as a result of the new corporate governance norms adopted by the corporation. He would be past the maximum age limit to serve on the board. Although it was acknowledged that the top CEO was responsible for helping the corpo- ration become a successful conglomerate, it was felt that he was assuming too much power in the organization. In his first thirteen years as CEO, the market value of the corporation rose an incredible amount, by the late 90’s however, analysts noticed

that the company was hinging too much on one executive. In Business Weeks annual survey of corporate boards, this corporation was ranked amongst the worst in the US. The top executive exercised an undesirable level of control over the BOD. He resorted to nepotism and favoritism when it came to appointing board member, and made most of the appointments from among his personal friends. This increased his power in the company and the board merely became a rubber stamp to his decisions. The company was described as being his “personal fiefdom”.

It is evident from the above that this is a case of abuse of power. In this case the person performing the abuse itself is the top executive. Here, the top executive uses mainly his influence to conduct the abuse. He does not use his wealth to bribe nor technology to steal documents, but very subtle personal influence to promote certain friends to the board, whom he knows will help him in return. It is extremely important to highlight the fact that what Top executive was doing was in no way illegal, for he was perfectly within the confines of the law, yet his actions are morally impermissible. The dilemma that this executive faces follows the trend in the previously explained section. He faces the dilemma of either gaining substantial personal benefit in terms of salary, bonuses, influence and control, yet at the same time, hinder the company’s growth and reputation or being ousted, maybe replaced yet the company would continue on the path of development that it was on.

DETAILS, DYNAMICS, AND INTRICACIES

Having discussed the abuse of power both in the world in a general sense and in Lebanon, it is important to provide a detailed description of the dynamics intricacies of the abuse of power.

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In order to delve into such depths, a more com- prehensive definition is needed. Although we had previously defined power, we had given a narrow definition and the concept of power, however is actually much more complicated. The concept of power is a measure of an entity’s ability to control its surrounding environment. In often cases in business situations this entity is a senior executive or can even be the corporation itself. Frequently the term authority is often used as a substitute for power. In a business context, this power or authority is perceived as legitimate due to the social or organizational structure in which it exists; CEO’s have power by virtue of the authority assigned to the position of CEO itself within the general structure. The use of power, contrary to common belief does not necessarily have to involve coercion, or threat of force. At one extreme, power does involve these aspects, but it more closely resembles what we know as influence, a very subtle concept that can still hold immense effects. Power has various sources and types, and therefore, its abuse also can come in several forms.

Due to the previous, the ethical dilemmas that manifest themselves as a result of the abuse of power are varied. The abuse of power is unique in the sense that it its action or inaction is a dilemma in itself, and it is also the cause of a dilemma for the person being abused. This is especially true in the organizational context. The person that will conduct the abuse itself faces the first dilemma that exists; that person must choose between gain- ing benefits themselves and harming the person they are abusing, or not abusing their power and harming the person, but gaining no benefit and oftentimes a loss. Repeatedly in the business world, this person is the corporation itself. In many cases the organization faces the dilemma of abusing its power and taking advantage of its consumers, partners, or shareholders to reap substantial ben- efits, or incurring losses in order to protect these

parties This dilemma can occur at varying degrees, for example, it can occur as something extremely subtle: an executive, who through subtle actions harasses his female employees, or something as large as an entire corporation that through their inaction allows for the dumping of toxic waste in a local river. These both are essentially the same dilemma mentioned earlier, but of obviously varying degrees.

The commonality amongst all cases of power abuse is that there always exist two main groups of stakeholders, those that are performing the action are one, and those that are on the receiving end of the action are the other. From the perspective of the person that is the performing the abuse the situation must as an obvious requirement, occupy a position in which they have some degree of power. It does not necessarily have to be a top manager or CEO with excessive amounts of power over all of his surroundings, but even the cashier at a small supermarket has a small degree of power that he can abuse if he chooses to. There is no one position that most commonly leads to abuse, but it is usually the high executive positions that lend themselves to the most flagrant cases. The higher the position the more power that person has, and as a result, the more opportunity for it to be misused. As a result, those in higher posi- tions of power have more opportunity to abuse it, and therefore, it is they that most commonly do so. In addition to this, and by virtue of their elevated positions, these individuals, or even on a general corporate level, receive extremely high media attention. This is due to the fact that their positions and the nature of abuse related to such a high degree of power have consequences that are far reaching and tend to be extremely serious.

On the other hand, while the receiver is tra- ditionally part of the organization, they do not necessarily have to be. The person or body being abused can be composed of one individual, or a specific group of people, or even hundreds of

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thousands of people all of whom can suffer as the result of a CEO or corporation’s action or inaction. Most commonly when it comes to serious cases of abuse of power, the damage affects an entire group of people. Another issue related with the abuse of power is the legality of it. This factor tends to be a highly circumstantial one, as in the case of the creative accounting used at Enron, this is an obviously illegal action to inaccurately write the accounting books. More subtle forms of abuse of power exist that are perfectly legal, yet still remain unethical; a manager who instead of engaging in active teamwork, instead relies solely on his own decisions and does not consider the options offered by others. In the previous examples he benefits by feeling superior and taking all the decisions and causes harm by putting his teammates down, yet nothing is illegal in the matter.

The Situation in Lebanon

An example of abuse of power in Lebanon is when a minister was accused of favoring one company with a bad record of building dams over another company that won the contract for building the dam in question. This accusation is a good example of unethical behavior, where the minister was accused of using his authority against the interest of the country and abusing the power that was entrusted to him as a representative of the people.

Under any system of government a social con- tract exists where the elected officials serve the best interest of those who elected them. Ignoring all the areas where that does not apply in Leba- non, when it comes to business the government isn’t much more ethical. Many, if not all of those with strong political backing in Lebanon have a stake in business. The political feuds that occur tend to extend onto other arenas such as business. The morality in this issue is the fact that this is an outright breach of the social contract. The government should not, by any standard, inhibit personal business merely due to the fact that it was in the aid of a competitive faction. In fact, it

turns out that they were to be distributed to Virgin and not MTV, once this issue was cleared up, the shipment of cell phones passed easily. This is hardly a debatable issue as there is a clear case of corruption in the system, which is immoral by any standards. Not only is this for the benefit of a small number of individuals, it is to the loss of many more. In addition to this instance of the shipment, the government had previously ap- plied pressure on Virgin and confiscated a lot of contraband, confiscating it only form virgin, and not investigating local suppliers. Again this is an instance of pressure on one business in which a local party has a major stake.

Abuse of power is considered unethical and a serious matter in all countries and that is why values such as transparency and accountability should exist and be practiced to limit abuse of power and furthermore those committing this crime should be punished. In our country it is very common to accuse, but it is even more unethical that these accusations are never followed through until the end to prove the allegations or rectify the issue. These accusations without intent to reach a resolve are also unethical and will make citizens lose confidence in politicians and the system. In the business world, abuse of power is harmful to companies when it favors unqualified businesses over more qualified ones for personal interests, this eliminates the very important value of fair competition that must exist based on set rules and procedures.

In the case of Lebanon as in the case of all democracies, there exists a social contract between those in government and those who put them there and both these examples are a clear breach of that contract. The government should be in service of the people and not attempt to hinder personal business due to political conflict.

Lebanon vs. the Rest of the World

Abuse of power in workplace is not only common in Lebanon, it is happening word wide in small

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companies as well as in big powerful corpora- tions. Infringing ideas and copyrights, will keep on happening because employees will always face the dilemma of Truth Versus loyalty. We always hear stories of professors stealing their research students’ ideas, employees coming up with new ideas and inventions but not getting rewarded. How knows whether some of the biggest inven- tions and chef d’oeuvre in history are accredited to the wrong person.

It is the managers responsibility to protect their team members, against power abusers in work place, a good manger should appreciate his staff, encourage any creative ideas, and work on improving their performance, efficacy and efficiency, he should be inspiring and fair to his employees, and open to share his experience with them, unfortunately it is not always the case. In- fringement of ideas is often done by supervisors, who use their employees to enhance their pictures in front of their mangers and their company’s stockholders. And for that they use their access to restricted information as well as their position of authority, usually they are not questioned or doubted by others because of the trust they gain by years of experience.

What pushes a manager or an employee to steal others ideas is the competition and the high expectations from their employers, their col- leagues, their families and friends in a way that puts the person in front of a continuous exam where he finds himself ready to cheat in order to pass. Copyrights infringement and theft of ideas is common everywhere in the word. Because that type of abuse of power is independent of place and geography, it is the way of dealing with such a case and the consequences that varies from a place to the other.

In Lebanon, cases of abusing authority in busi- ness is complicated, because most of the time, it is mixed with politics. A powerful politician can sometimes change administrative decisions within a company, or put a company out of business, he can work his authority in order to force a man-

ager to hire or to fire an employee. In Lebanon criminals can get away without punishment if a powerful politician or a business man decides to “pull some strings” for their sake, because even the justice system is always under the threat of power abusers. An example of the abuse of power in busi- ness is the ongoing debate of gravel machines in Lebanon, this business seems to be unstoppable because gravel machines owners are protected by powerful politicians and businessmen.

In other advanced countries, the abuse of power also exists and it is as bad as the case in Lebanon, one of the differences, is the mass media effect. In Europe for example, a president, a governor, or a manger can be forced to quit if the media discovers an act of authority abuse. In Lebanon scandals of abuse of power are almost a constant part of the daily news, but going to the media does not stop the power abusers because the media channels are owned or funded by political and religious parties.

“Abuse of power in the workplace is becoming a national concern in the United States. According to the Workplace Bullying and Trauma Institute, 54 million employees surveyed in September 2007 reported being victims of abuse in the workplace”. (Abuse of Power in the Workplace | eHow.com) but the laws that protect against power abusers are more respected in the USA than in Lebanon.

The fact of abuse of power in Lebanon is sometimes justified by the famous saying “ev- erybody else is doing it” and what is known to be ethically wrong is not that immoral anymore, because unfortunately blowing a whistle by any abused person is practically impossible, either because of fear and this is common everywhere, or because the whistle blower does not expect to be heard and this is a typical case in Lebanon.

LESSONS LEARNED

The abuse of power is a bad situation and conduct that we can face everywhere in the world. It is not exclusive or specific for any party, gender, color

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or even region on earth although the slide vari- ance in its definition that may reside. Neverthe- less the “abuse of power” practices and its level of acceptance do change around the global. It is forbidden in some communities whereas it forms a life pattern and dissolves within the system in other societies.

According to Aristotle for those things which we must do after having learnt them we learn to do by doing them, in other words we become just when doing just actions and we become bad by doing bad actions. Hence nobody is treated as power abuser unless he is frequently abusing the power he possesses till it becomes a habit and consequently a vice since, and always per Aris- totle, Moral virtues and vices arise from habits. When abuse of power becomes a habit within an organization, it has a high potential to become a part of the system as it evidently appears in many political regime where abuse of power is exerted by the upper positions within the state. In similar cases the abuse of power becomes a com- mon and normal behavior as the people beneath start to rationalize the related practices away and justify them.

Generally the abuse of power filters down into the organization. If the head of an organization is infected, the below members and subordinates will become as well. The flow of this negative infection is due to the absence of any punishment or clean idol symbolized by the highest authorities. “The system is unfair”, If we don’t do it, someone else will”, “That’s the way it has always been done”, everybody else do it” these are common sayings that contribute in rationalizing the abuse of power away and justify the wrong associated actions. They standardize the power abusing so it fits into the culture and gets handed down from generation to generation. As a result the power abuser will be replaced by another power abuser since that is the way it has always been done!

EXPERT OPINION

Before one becomes a leader, success is all about growing oneself; when one becomes a leader, success is all about growing others. Aristotle was ultimately more interested in developing people who were in themselves doing the right things for their subordinates than formulating detailed rules for exerting ones power. Leaders must develop in the context of good leadership training to develop the right habits which dispose them make good choices. Anyone can manage for the short term by just doing the everyday work, and every one can manage for the long run by dreaming. Leaders made leaders because people believed they could manage and dream at the same time. Leaders must have enough insight, experience, and rigor to balance the conflicting demands of short- and long-term results.

Performing balancing acts everyday is leader- ship. Of course, life would be easier if leadership was just a list of simple rules, but paradoxes are always exists. So no matter how hard authorities tried to put rules, regulations, codes of ethics to prevent the abuse of power, still however leaders will always see things that is actually true for them. And that is part of the fun of being a leader even though every day is considered a challenge. It is an opportunity to improve in one’s job. One can only give it everything one got. So leaders must act form duty and moral worth. For Kant leaders must not look for happiness rather they must be equipped to will what is good and worthy even if they don’t know the consequences. The good will which is not motivated by duty is the only valuable thing.

No one can control the results and the conse- quences of an action; actually one can only control the action by doing the right thing by being the right person on the first place. So leaders in order to act ethically and be a contributor team player

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must have to evaluate, making sure the right people are in the right jobs, supporting and advancing those who are performing and moving out who are not. Leaders have to coach, guide, critique, and help people to improve their performance in every way. And finally they have to build self- confidence, always providing encouragement, caring, and recognition.

FUTURE TRENDS

Globalization and increased expansion brought new ethical challenges regarding abuse of power. World globalization and increased expansion brought about new ethical challenges regarding the abuse of power. Major concerns regarding child labor arose, as well as increasing environmental issues and many related to bribery and facilitation payments. Major ethical dilemmas regarding the abuse of power and unsafe work practices in third world countries arose, leading to several boycotts and many awareness campaigns6. Increased cor- porate liability, cybercrime, and privacy issues were also issue.

Parliament passed laws that had the objective of prohibiting acts of abuse of power. Also, commit- tees that would be in charge of creating a strategy to fight corruption in Lebanon were created but it was never accomplished. Furthermore, initiatives of local newspapers and media to expose activities of power abuse.

There exist a number of solutions in order to decrease the frequency and effects of abuse of power:

• Person in charge should always be con- stantly evaluated on the work he or she is doing; there should be a system that checks on the integrity of the work that these peo- ple and truthfulness. More reliable system of checks and balances should be set in

place. People in power should not only be evaluated on a performance bases but also should not hold the same positions for too long.

• Abusive management is adversely related to people’s ethical bravery and their com- pliance with the organization’s central standards. Moreover, work situations with different amounts of abusive supervision, shown by the level of abusive supervision conveyed by workers, weakened the rela- tionship between the level of abusive su- pervision experienced by people and both their ethical bravery and their compliance with organizational standards. Ethical bravery and compliance with organization- al standards accounted for the relationship between abusive supervision and workers’ ethical purposes and unethical actions. These results propose that abusive supervi- sion can demoralize moral agency and that being abused personally is not obligatory for abusive supervision to adversely affect ethical consequences (Hannah, 2013).

• An arbitrated moderation model of the consequences of carefulness and handling approaches on the relationship between offensive management and workers’ job performance across 2 studies conducted in India found proof that the connection be- tween abusive supervision and work per- formance was weedier when workers were high in conscientiousness. Moreover, the use of an avoidance coping strategy fa- cilitated a negative relationship between abusive supervision and performance. Finally, the moderating effects of consci- entiousness were mediated by the use of avoidance coping strategies. Our findings contribute to theories of abusive supervi- sion, personality, coping strategies, and job performance (Sandkeolyar, 2014).

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Abuse of Power

• Leaders’ collective and individual identi- ties were uniquely related to transforma- tional and abusive behaviors, respectively. “Abusive behaviors are most frequent when a strong individual identity is paired with a weak collective identity. Frequency of transformational behaviors accounts for the largest proportion of variance in per- ceived leader effectiveness, followed by frequency of abusive behaviors and con- sistency of transformational behaviors “(Johnson et al, 2012).

CONCLUSION

There are a number of solutions in order to decrease the frequency and effects of the abuse of power. The solution to decrease the likelihood of abuse of power by politicians and within businesses is that the person in charge, the elected official or the manager or CEO of a company should always be constantly evaluated on the work he or she is doing. There should be a system that checks on the integrity of the work that these people are doing especially since they are given such important responsibilities and should always practice their jobs with honesty and truthfulness. Such a rewards based system would encourage work in the favor of the organization in whole and not just to secure high bonuses.

Furthermore a more rigid system of checks and balances should be set in place. While the BOD and the shareholders provide such a system, a more proactive one will greatly reduce instances of power abuse. In addition, these people in power should not only be evaluated on a performance bases but also should not hold the same positions for too long. It is important for the growth of any company or country that its leaders always be changed so that first there is less chance that one

person will occupy a post for too long that he is given too much control and could abuse this con- trol. Second it will be to the benefit of the people these leaders and executives are working for if they could always have people who are interested in the wellbeing of others and are not afraid to train others who will take over their jobs. Having time limits on certain position can both aid the personal development of the person holding the position and benefit the company in a general sense. For example, ambassadors abroad have four-year limits in each country that they are in, in order to avoid such an issue.

REFERENCES

Boyle, W. S. (2007). Abuse of power. Academic Press.

Business Ethics Case Studies. (2009). Case study in business, management. Author.

IMCRINDIA Case Studies. (2006). Trouble in the ‘Magic Kingdom’: Governance problems at Disney. Author.

CBS News. (2003). Corporate conflict. Retrieved from www.cbsnews.com

Executive. (2002, July). A dam too far. The Ex- ecutive.

Gebara, K. S. (2007). The political economy of corruption in post-war Lebanon. Beirut: Lebanese Transparency Association.

Ghilliyer, W. A. (2008). Business ethics a real world approach (2nd ed.). New York: Mcgraw Hill.

Gunther, M.S. (2002, January 7). Has Eisner lost the Disney magic? Fortune.

Gunther, M.S. (2003a, December 22). Disney’s loss is Eisner’s gain. Fortune.

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http://www.cbsnews.com

Abuse of Power

Gunther, M.S. (2003b, December 27). The direc- tors. Fortune.

Hannah, S., Schaubroeck, J. M., Peng, A. C., Lord, R. G., Trevino, L. K., & Kozlowski, S. W. J. et al. (2013, July). Joint influences of individual and work unit abusive supervision on ethical intentions and behaviors: A moderated mediation model. The Journal of Applied Psychology, 98(4), 579–592. doi:10.1037/a0032809 PMID:23647209

Johnson, R. S., Venus, M., Lanaj, K., Mao, C., & Chang, C.-H. (2012). Leader identity as an antecedent of the frequency and consistency of transformational, consideration, and abusive leadership behaviors. The Journal of Applied Psychology, 97(6), 1262–1272. doi:10.1037/ a0029043 PMID:22730903

Nandkeolyar, A. S., Shaffer, J. A., Li, A., Ekkirala, S., & Bagger, J. (2014, January). Surviving an abusive supervisor: The joint roles of conscien- tiousness and coping strategies. The Journal of Applied Psychology, 99(1), 138–150. doi:10.1037/ a0034262 PMID:23978107

Schellen, T.S. (2002, May). Playing it dirty. The Executive, 26-28.

Tohme, N.S. (2002, December). Difficult to deal with. The Executive, 14-15.

Transparency International. (2008). Africa and the Middle East. Transparency International.

KEY TERMS AND DEFINITIONS

Abuse: Over utilization of available means of practice resulting in excessive damages.

Appraisal: Method of measurement aiming at establishing a numerical value for an existing asset.

Hierarchy: Multi-layered system of power levels specifying direction of flow for authority and communication channels.

Leader: Individual charting a course that is followed by others later.

Manager: Executive enforcer of rules of behavior and performance mechanisms towards achieving set objectives.

Power: A source of energy providing a base for the flow of clout, influence and achievements.

Subordinate: Individual operating under the supervision of a higher level of authority.

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http://dx.doi.org/10.1037/a0032809

http://www.ncbi.nlm.nih.gov/pubmed/23647209

http://dx.doi.org/10.1037/a0029043

http://www.ncbi.nlm.nih.gov/pubmed/22730903

http://dx.doi.org/10.1037/a0034262

http://www.ncbi.nlm.nih.gov/pubmed/23978107

Abuse of Power

APPENDIX

Learning Objectives

L.O.1: Define abuse of power and discuss where it can be found. L.O.2: Define power. L.O.3: Discuss how globalization and increased expansion brought new ethical challenges regarding

abuse of power. L.O.4: Discuss why power abuse stories are not reported in Lebanon. L.O.5: Explain the Lebanese attempts to fight power abuse after the war. L.O.6: Clarify the ethical dilemmas created by power abuse. L.O.7: List solution to decrease the effect of power abuse.

Summary

Define Abuse of Power and Discuss Where It Can Be Found

Abuse of power is the act of using one’s position of power in an abusive way. Abuse of power may be realized where hierarchies present; in governments, in economic systems, in the workplace, and in families

Define Power

Power can be defined as the ability, or capacity to exert one’s will on others by virtue of their social position, physical strength, wealth, technology, weapons, or trust that others confide in the person.

Discuss How Globalization and Increased Expansion Brought New Ethical Challenges regarding Abuse of Power

World globalization and increased expansion brought about new ethical challenges regarding the abuse of power. Major concerns regarding child labor arose, as well as increasing environmental issues and many related to bribery and facilitation payments. Major ethical dilemmas regarding the abuse of power and unsafe work practices in third world countries arose, leading to several boycotts and many awareness campaigns. Increased corporate liability, cybercrime and privacy issues were also issue.

Discuss Why Power Abuse Stories Are Not Reported in Lebanon

The majority of the Lebanese companies are family owned firms meaning that there are favorable chances for a normal employee to be directly supervised and monitored by the owner of the company who con- trol punishment and appraisal. Moreover, the high unemployment rate makes worker in the Lebanese companies generally tends more to save their jobs and definitely avoid any confrontation with their boss which may probably lead him out of the place.

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Explain the Lebanese Attempts to Fight Power Abuse after the War

After the war ended some there have been some attempts to fight the abuse of power that was happen- ing within the government by Civil Society Organizations as well as by some state officials themselves. Parliament passed laws that had the objective of prohibiting acts of abuse of power. Also, committees that would be in charge of creating a strategy to fight corruption in Lebanon were created but it was never accomplished. Furthermore, initiatives of local newspapers and media to expose activities of power abuse.

Clarify the Ethical Dilemmas Created by Power Abuse

The person that will conduct the abuse itself faces the first dilemma that exists; that person must choose between gaining benefits themselves and harming the person they are abusing, or not abusing their power and harming the person, but gaining no benefit and oftentimes a loss.

List Solutions to Decrease the Effect of Power Abuse

There exist a number of solutions in order to decrease the frequency and effects of the abuse of power:

• The person in charge should always be constantly evaluated on the work he or she is doing; there should be a system that checks on the integrity of the work that these people and truthfulness.

• More rigid system of checks and balances should be set in place. • These people in power should not only be evaluated on a performance bases but also should not

hold the same positions for too long.

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Chapter 4

DOI: 10.4018/978-1-4666-7254-3.ch004

Sexual Harassment Laws and Their Impact on the

Work Environment

ABSTRACT

This chapter examines the impact of sexual harassment laws in a work environment. Different contexts are examined with different sexual harassment laws. The most vulnerable individuals are identified. The particular case of Lebanon is inspected where few laws regulate this matter. A comparison is established with the USA. Lebanon and the United States have a different view of sexual harassment. In Lebanon, no clear laws protect women. In addition, Lebanon is more tolerant than the United States. The difference in cultures also contributes in people’s willingness to disclose harassment. In the United States, people are used to the concept of right and a judicial system that preserves it. In Lebanon, such a matter is taboo, and people are discouraged from disclosing to preserve their reputation.

INTRODUCTION

An overall lawful definition of sexual harassment is an unwelcomed bodily or verbal sexual advance by coercion of the harasser’s superior position or in an exchange for some kind of reward. It can take both verbal and/or physical forms between people from the same or opposite sex. Sexual harassment in an office environment can be very destructive as it creates an unsafe environment and promotes unfairness. It affects one’s ability to perform cor- rectly in his or her workplace, and makes it hard for them to work at full efficiency, especially when they are affected from the emotional, physical and

mental side. Employees who are mostly exposed and affected by sexual harassment include mostly low salary staff with lower level of education, and young single women.

BACKGROUND

Sexual harassment is coercion, aggression, or offensive behavior by a person towards another. The United Nations adds the word ‘unwelcome’ to its definition of the word ‘sexual harassment’ and by that they mean although the act might not actually be an assault and the person being harassed

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Sexual Harassment Laws and Their Impact on the Work Environment

accepted the act, in his/ her opinion it was an un- welcomed act and therefore the act is categorized as harassment. Sexual harassment is always unlaw- ful. It can take place under any circumstances; the simplest would be when an employee of a higher rank asks a lower ranked employee for sexual favors in return to bonuses or a raise. Human rights have evolved tremendously; in the US the civil rights act of 1991 gave the woman the right to sue for sexual discrimination and harassment. In 2005 The European council amended the 1976 council to include rights against sexual harassment. Lo- cally the Lebanese ‘Anti-Harassment Campaign’ has launched its latest campaign using a mascot called Salwa. “SALWA” was created to promote gender equality, following a dramatic rise in re- ports of sexual harassment. After taking a brief understanding about the matter, we would like to say that societies are evolving towards the better where people of all races, sexes, colors have equal rights. There are certain norms that apply here in Lebanon and are common among most if not all Arab countries that need to be changed, these understandings must be altered and updated if we were to be part of the forthcoming new social life styles and the social welfare.

SEXUAL HARASSMENT IN THE HEALTH SECTOR

Sexual harassment is a type of sex discrimina- tion. Equal Rights Advocates (2012), the lawful description of sexual harassment is

Unwelcome verbal, visual, or physical conduct of a sexual nature that is severe or pervasive and affects working conditions or creates a hostile work environment.

International Labor Office (2001), “the two principal types of sexual harassment in the work- place included in the definition of the European

Communities are ‘quid pro quo’ harassment and the creation of a “hostile working environment” ILO, (2001) defines the two principles as:

1. Quid Pro Quo Sexual Harassment: “Refers to a demand by a person in authority, such as a supervisor, for sexual favors in order to obtain or maintain certain job benefits, be it a wage increase, a promotion, training opportunity, a transfer, or the job itself. It forces an employee to choose between giving in to sexual demands and losing job benefits” (ILO, 2001, p 21, Para.4).

2. A Hostile Working Environment: “Refers to unwelcome sexual advances, requests for sexual favors or other verbal, non-verbal, or physical conduct of a sexual nature which interferes with an individual’s work perfor- mance or creates an intimidating, hostile, abusive, offensive, or poisoned work envi- ronment”. (ILO, 2001, p.22, Para.1)

Health service industry is not immune from the problem of sexual harassment. One study pro- poses that the high occurrence of harassment in health care is linked to the health care industry’s divided professional segregation. Prestige and Power are important factors to sexual harassment. (Kaye, 1996)

Bio-medicine (2009) ‘Doctors and administra- tors in positions of authority harass other doctors, nurses and other non-medical staff. Also, patients may harass doctors, employees, and nurses.” In short, victims of sexual harassment in health sector can be nurses, doctors, patients, and staff;

Kaye, (1996) for example, a nurse may be harassed by (Colleagues, Supervisors/directors, Physician, doctors, Patients, Patients’ relatives); also, patient may be sexually harassed by (Nurses, doctors, staff in health center, physicians); in addi- tion, lower level of employees may be harassed by (nurses, physicians, Patients, Patients’ relatives).

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Sexual Harassment Laws and Their Impact on the Work Environment

BIO-Medicine (2009) reported that “Women in the health care sector suffer a lot of discrimina- tion in Lebanon, especially the nurses’ the role of a nurse is greatly looked down upon by most of the Lebanese community, with people seeing it as a low profile job.”

BIO-Medicine (2009) reported:

Nurses described sexual harassment at the work- place to be both verbal and non-verbal communi- cation and/or behavior that might hurt the victim physically and/or emotionally.

Nurses reported a wide range of harassing behaviors, including but not limited to:

1. Offensive sexual remarks, 2. Unwanted physical contact, 3. Unwanted nonverbal attention, 4. Requests for unwanted dates, 5. Sexual propositions, and 6. Physical assault.

SEXUAL HARASSMENT AT WORK WORLDWIDE: STATISTICS FROM THE U.S.

Here are figures of sexual harassment at work in the United States alone during the year 2010, according to the Employment Equal Opportunity Commission: In the year 2007, up to 12,510 charges of sexual harassment were received in the U.S alone. They showed that females were not the only victims. In fact, 16.0% of those charges were filed by males.

SEXUAL HARASSMENT AT WORK: STATISTICS IN CANADA

Even in Canada, sexual harassment showed to have high levels of reporting during the past several years, with the majority of these reports being a

result of sexual harassment at the office. Table 1 shows frequency figures that illustrate the situation of sexual harassment in the work place in Canada. Sexually harassed individuals in the field of work in Canada show that the offenders coming from a work environment (staff + professors) are as high as 25% of the total persons accused.

SPECIFIC BACKGROUND

South Africa

No cases were reported in South Africa in the recent year. However, firms are discreet to mention what internal complaints they have controlled. As a preventive measure, governments and private firms, implement sexual harassment policies, which regulate relationships between co-workers. Companies may be held liable of employees’ sex related discrimination, because of the absence of internal systems to fight sexual harassment. Then to avoid expensive lawsuits, companies start implementing internal policies to hold individual employees liable.

This increase in protection for female workers created a safer environment and paved the way for women to become the majority of the workforce.

A good sexual harassment law preserves the right of the persons needing it, while being fair to everybody else. When the first sexual harass- ment laws were introduced they were intended

Table 1. Reported sexual harassment incidents in Canada in institutions of higher education

Persons Accused Frequency Percentage

Students 33%

External 24%

Unknown 18%

Staff 15%

Professors 10%

Total 100%

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Sexual Harassment Laws and Their Impact on the Work Environment

to protect women in general as women are more likely subject to sexual harassment than others. The cons of sexual harassment laws are:

• They present a conceptual problem by vi- olating equality right; women are getting special treatment because they are women.

• They create under-inclusive and over-in- clusive observations of the case.

• The law being over-inclusive creates a sep- aration between males and females, which builds a more hostile environment.

• Firms applied harsh employees’ inter-rela- tions policies to avoid expensive lawsuits.

• Any suspects are pitilessly punished. • Some firms used sexual harassment as an

excuse to fire employees.

INTRODUCTION TO SEXUAL HARASSMENT LAWS

Sexual harassment is the act of directing dis- criminatory sex-related actions towards a fellow coworker (in the workplace) or any other person out of sexual attraction or hostility. It can take both verbal and/or physical forms between people from the same or opposite sex. Harassment can occur either by consent of both parties or by force and intimidation. Thus when harassment occurs the work place becomes hostile, offensive and oppressive.

Sexual harassment in an office environment can be very destructive as it creates an unsafe environment and promotes unfairness. It affects one’s ability to perform correctly in his or her workplace, and makes it hard for them to work at full efficiency, especially when they are affected from the emotional, physical and mental side. As a preventive measure, governments and private firms implemented sexual harassment policies.

Those vary by strictness and degree of implemen- tation, and their presence has a certain effect on the work environments. Sexual harassment laws are set by the government and policies by firms to regulate relationships between co-workers. The spectrum of restriction varies from no relation at all outside work to complete freedom. However the dilemma becomes whether employees have the right to interact freely, or should policies regulate this interaction?

Introduction to Sexual Harassment Laws in the World

Sexual harassment laws were first established in the U.S in the year 1964 as part of “The Civil Rights Act of 1964”. They were meant to regulate harassment directed to male and female workers, but were created by the motive of the harassment that was targeting female workers. The main forms of discrimination that were prohibited by the act were racial, sexual, color, national origin religious. The first form of sexual harassment that was addressed by the act was the job description material that discriminated applicants based on physical appearance. The series of regulations that were created in the U.S were first triggered by the case of “Barnes vs. Train (1974)”, which was the first publicly acknowledged case of sexual harass- ment. The United States of America is the most knowledgeable and most educated country when it comes to sexual harassment and its regulation.

In India sexual harassment was made illegal leading to the establishment of regulations in 1997. In Israel the first laws that addressed sexual harass- ment were first introduced in 1988 under the name “Equal Employment Opportunity Law” where a harasser was not allowed to retaliate to his victim if he or she were turned down. In 1998 sexual harassment became illegal regardless of retalia- tion. In “May 2002”, the first forms of laws that

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Sexual Harassment Laws and Their Impact on the Work Environment

address sexual harassment were created in Europe, where the European Union forced all participating countries to adopt the new regulations. In China, in the year 2005 modifications were added to the “Law on Women’s Right Protection”, where sexual harassment became part of the regulations, and was prohibited and placed under research in order to further define sexual harassment.

General Historical Background about Sexual Harassment Laws

In 1964, Title VII of the civil rights act gave the rights to employees to be protected under both state and federal law against the workplace sexual harassment. Under this act, employers may not intentionally use skin color or ages or any way of discrimination as a basis for his decisions relating to the employment relationship. Therefore this act protects against discrimination including sexual harassment. The civil right act of 1991 added to the previous act more protections including the expansion of women’s rights to sue and then collect corrective damages for any sexual discrimination incident.

In the last twenty decades of the twentieth sanctuary, feminist groups started thinking about the rights of women in the work place, and about means to protect that right. According to Linda Clarke’s article “Sexual Harassment Law in the United States, the United Kingdom, ant the Euro- pean Union: Discriminatory Wrongs and Dignitary Harms” (2007), “the term sexual harassment was first coined in 1975 during a brainstorm session at Cornell University conducted by a feminist group”.

The need for laws protecting women from any unwanted sexual action increased as women joined the work force, and a clash between the two genders occurred. During the seventies an economic boom was taking place in the United States, in addition feminist movements proclaim-

ing women rights were on the rise. This is when many female workers joined the workforce. The entrance of females to the workforce, which is considered masculine, created a shock. Charles Van Wijk, a psychology professor at the Univer- sity of Cape Town, provides three explanations for sexual harassment in the military context in his study titled “Sexual Harassment of Women in the South African Navy” (2009). The three are as follows:

• When women entered offices, plants and other work areas considered exclusively masculine, male workers felt that their per- sonal space was being violated and faced this new development with unwelcoming behavior that included sexual harassment.

• Another explanation suggests that men wanted in their sub-conscience to repro- duce in the work environment the same sociological hierarchy between men and women, where the latter is the inferior being.

• A third explanation argues that the nature of relation between men and women is incorporated in humans since their early developments. That’s why they tend to re- produce this sociological intimate relation- ship at work. Nevertheless men have more capacity to accept this reproduction than women.

IMPACT OF ISSUING SEXUAL HARASSMENT LAWS ON THE WORK ENVIRONMENT

In the workplace, there are people from different backgrounds, cultures, gender. Each, as we have already mentioned have a different perception and tolerance rate to sexual harassment. On the

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Sexual Harassment Laws and Their Impact on the Work Environment

other hand a good law is the one that preserves the right of the persons needing it, will being fair to everybody else. When the first sexual harass- ment laws were introduced they were intended to protect women in general. However studies have shown that some women are more likely subject to sexual harassment than others and the purpose of this section is to show who they are.

In Merkin’s study on “cross-cultural differ- ences in perceiving sexual harassment” (2008), she showed who are the classes of people who are the most vulnerable.

In the United States, the types of employees who are the most exposed are:

• Employees who have low salary; • Lower level of education; • Young single women.

The spectrum of different laws in the world: from no laws to very uptight. The laws related to sexual harassment in the world are shaped according to the country’s constitution, cultural background and beliefs. We can undoubtedly assume that sexual harassment laws will not be the same in Europe and the Arab world because of the cultural differences, and how the relation between man and women is seen.

In fact in western countries sexual harassment involves a harasser, which is usually a man, and a victim, usually a woman. However in the Arab world there is a sort of “reverse sexual harass- ment” where a woman can report any man if he does not succumb to her demands. Sexual harassment laws were born in the United States to protect women from sex discrimination at the workplace. However in Clarke’s article we learn about two different frameworks one in Europe. In the United States, sexual harassment is considered as sex discrimination because of the arguments (raised by MacKinnon):

• “The conduct is sexual by nature and sexu- al equals sex.”

• “Sexual harassment is an example of sub- ordination of women by men.”

In Europe, sexual harassment laws are seen differently than in the United States. They are built based on a different framework: “Dignity for all”. This framework treats sexual harass- ment as an assault to one’s dignity rather than sex discrimination.

Looking a sexual harassment from this per- spective is due to the fact that Europeans saw it as “mobbing”, in other terms bulling and not discrimination. Therefore the harm caused by “mobbing” is not restricted to sexual harassment; it includes any action that harms one’s dignity. Another reason explaining why Europeans looked at this matter from the dignity perspective can be tied up to the Roman historical background. Because both frameworks were not perfect, the new UK framework for sexual harassment laws included both American and European approach.

DRAWBACKS OF SEXUAL HARASSMENT LAWS

Many scholars criticized sexual harassment laws, and wondered if they were really in favor of women’s rights. First the sexual harassment law was accused of presenting a conceptual problem by violating the equality right: women are being treated in a more special way because they are simply women.

Also, “One of the weaknesses of the American law according to Vikki Shultz is that it creates under-inclusive and over-inclusive observations of the case. It is under-inclusive when the court examines only sexual facts to determine whether there is discrimination or not. It is over-inclusive

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Sexual Harassment Laws and Their Impact on the Work Environment

when the court considers any sexual behavior as discrimination” (Clarke, 2008). The law be- ing over-inclusive creates a separation between males and females, which builds a more hostile environment

Another weakness sexual harassment laws of- fer is the fact that firms applied harsh employees inter-relations policies to avoid expensive lawsuits. In addition any suspect is pitilessly punished. As well as some firms used sexual harassment as an excuse to fire employees. In Clarke’s article it is stated that MacKinnon, a female legal scholar activist, refused to consider sexual harassment can be covered by the emotional distress related laws as it did not account for the fact that the crime was addressed by a man to a women with sexual implications or actions.

Therefore the issuance of sexual harassment laws implied that specifically women, in the workplace are protected from any sex discrimina- tion act. As a result many companies were held liable of employees’ sex related discrimination, because the firms did not have internal systems to fight sexual harassment. Then to avoid expensive lawsuits, companies started implementing internal policies to hold individual employees liable. This increase in protection for female workers created a safer environment and paved the way for women to become the majority of the workforce in 2010 according to associatedcontent.com managed by Yahoo.

In a study entitled “Cross-Cultural Differences in Perceiving Sexual Harassment” conducted by Dr. Rebecca Merkin (2008), a professor at Baruch College in New York, it was proven that sexual harassment is not universal in different cultures in terms of perception, tolerance and reaction. The study primary focuses on the differences between American and Latin American workers in Latin America. However we believe that we can generalize this conclusion and state that the perception and reaction towards sexual harassment in Lebanon is different from the one in the United States or any other country with different values.

Therefore to evaluate the definition of sexual harassment laws according to society we need to examine closely the set of beliefs related to sex, reputation and work. We also need to evaluate the perception and sexual harassment tolerance of different groups of people.

SEXUAL HARASSMENT BACKGROUND/HISTORY IN LEBANON

The Lebanese society is considered as conserva- tive and hard on information, giving that Lebanon is a Middle Eastern country, a part of the world where personal privacy is valued. Lebanese indi- viduals are concerned to keep a good reputation. In fact recently TV shows witness great success because they relied on jokes telling, where most of the jokes were sexually related. On the other hand, sexual harassment perception and tolerance varies among different tranches of the society: Women versus men, Younger Women versus Older Women, Younger men versus older men, white collar versus blue collar.

In a study entitled Attitudes and Perceptions of Workers to Sexual Harassment conducted by Dr. Marita McCabe and Dr. Lisa Hardman, two professors at the Deakin University, it was shown that in the United states both blue and white col- lar women are more perceive more acts as sexual harassment than men; both white collar and blue collar men and women saw the case as sexual harassment when the scenario included a female victim. When organization tolerance was lower for sexual harassment (mainly white collar) men were more tolerant than women about different cases. When organization overall tolerance was high (blue collar), the tolerance for both genders was the same. McCabe and Hardman explain this tolerance level by the fact that white-collar women are less used to sexual harassment, as opposed to blue-collar women. Conclusions can be generalized to the Lebanese work environ-

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Sexual Harassment Laws and Their Impact on the Work Environment

ment since the study did not include any cultural variables. Lebanon is high on tolerance for sexual harassment since the overall acceptance is high as laws are not strict about that matter, Television shows broadcast sexual explicit, degrading for women jokes shows without being stopped and Lebanese public expresses temptation to watch. The data we have relatively to the study stated before proposes that Lebanese people are high on tolerance, and start suspecting sexual harassment when a sexual action is being made rather than oral sexual insinuations only.

Sexual Harassment laws related to offices imply that those laws preserve women’s right in a work environment. However the Lebanese constitution was issued in the 1920s and was a copy of the French constitution. Furthermore little changes were performed on this constitution and women during the period of issuance did not join the work force yet. This is why we suspect that Lebanese laws do not have a clear definition of sexual harassment, thus do not include clear previ- sions to protect women at work. This hypothesis is confirmed by an article on NowLebanon.com entitled “sexual harassment” where it is men- tioned that there is no clear law protects women from sexual harassment. In the same article it is mentioned that one of the primary reasons for the prevalence of sexual discrimination is due to the fact that the Lebanese constitution portrays men as superior to women: Women cannot give nationality to kids, women cannot open a bank account for kids without consent of father…

Sexual Harassment Case in Lebanon: Context, Laws, Impact

Many harassment cases exist but we do not hear about them because of the nature of the society. Everyone in Lebanon is acquainted with at least one person who has suffered from sexual ha- rassment. The first case is about child who got

sexually harassed by a 40-year-old man in the month July of the year 2009. This took place at a mini-market located in Beirut. The 9-year-old boy went to the market to buy candy. Meanwhile he was approached by the storeowner and was lead to the 2nd floor where he got sexually assaulted. After his encounter, the boy went and told his mother about his experience. The mother contacted the authorities, and the offender was taken into custody. The storeowner was released from jail and left the country to work overseas instead of getting his three years in jail punishment.

The second case, which we will focus on more than the previous one is that of a doctor who sexu- ally harassed his hospital patients and was fired as a consequence.

Me: Will it be inconvenient to you if we include your name in the interview?

Source: I prefer not, for two reasons. First the doctor’s daughter is a close friend of mine. Second I think those issues of sexual harass- ment should not be discussed with names. However I think we should know about them and learn from them for later on in our career.

Me: Do you mind if we include the name of the doctor who committed these sexual harass- ment acts?

Source: I don’t mind because this issue has been publically known in the Lebanese com- munity.

Me: Could you please tell us what you know about the incident?

Source: This incident happened with a famous gynecologist. I heard about it from different people. The details of the story are that this doctor was involved in different sexual acts with his patients. After the hospital admin- istration found out about this, he was fired from the hospital and he had to open up his own Clinic. However his business suffered and patients took distance from him.

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Me: Could you please provide us with more details regarding the sexual harassment acts that took place at the Hospital?

Source: Obviously he had sex with them. Me: Did the doctor get tried for his actions or

was it solved in a discrete matter? Source: In a discrete matter because the reputa-

tion of the hospital was at stake! Me: What was the impact that this incident had on

the offender’s family? In other words, what happened after the incident to the doctor and his family?

Source: He got separated from his wife. His daugh- ter remained with her mother. She sees her father from time to time. There was no trial, it was resolved with a mere dismissal from work, and the impact that the incident had on the harasser’s family was grave. He and his wife got separated, and their daughter who was at the age of 11 must have suffered greatly because of it.

THE CASE OF ONE AUTO MANUFACTURING BUSINESS

In 1998, an auto business in the USA agreed to pay $34 million to female workers. The company was charged with being hostile against women. The United States Equal Employment Opportunity Commission estimated that about 350 current and former employees at the auto business plant would receive payments of up to $300,000, the maximum possible under civil rights laws. Also, the consent decree requires the auto business to provide sexual harassment training to employees, revise its sexual harassment policy as essential and examine claims of harassment within three weeks under a “zero tolerance” policy. Eventually, the auto business was able to clean up its tarnished reputation. The company immediately overhauled the anti-sexual harassment and complaint system, which now boasts a zero tolerance policy.

CONCRETE EXAMPLE OR CASE

The case of the president and his staff: context, laws governing the case, both point of views, trial and impact: December 1998 US president was impeached by the vote of the U.S House of Representatives for obstructing justice by at- tempting to conceal the affair he was having with a Whitehouse intern.

The laws regulating and prohibiting sexual harassment were those defined by “Title VII of the Civil Rights Act of 1964” updated lately when additions were triggered by different cases that occurred during the period in between. No- vember 1995, witnessed the beginning of the affair between the 42nd president of the United States and the 22 years old unpaid intern. April 1996, the intern was reassigned to the Pentagon. A year later, the legal team calls upon the intern for questioning. Later the same legal team asked the president about his relation with the intern, to whom he replies evasively. Then he clarifies his statement before a grand jury and the press the following statement: “I want you to listen to me, I am [going to] say this again, I did not have sexual relations with that woman”. The president was denying ever having an affair with the young intern, and she was testifying in court against him in order to convict him of sexual harassment after having acquired immunity from the government. The controversy took place and the truth unveiled itself in the summer of the year 1998. The president gave the following statement: “Indeed I did have a relationship with Miss Lewinsky that was not appropriate, in fact it was wrong”.

CONTRAST BETWEEN CONTEXTS AND REGULATIONS

The only relevant contrast we can make between both cases is that in the United States there are sever repercussions for sexual harassment because

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of strict regulations. In Lebanon repercussions are only due to intention of preserving the reputation. Contrast between Lebanon and the United States regarding relationships and professional relations, and perception of sexual harassment. Lebanon and the United States have a different view of sexual harassment. As we have mentioned no clear laws protect women in Lebanon as opposed to the United States. Also as a general tolerance Lebanon is more tolerant that the United States. The difference in cultures also contributes in people’s willingness to disclose harassment. In the United States, people are used to the concept of right and judicial system that preserves it. As opposed to Lebanon where such a matter is taboo, and people are discouraged to disclose for the sake of preserving their reputation.

Finally when there are policies and regulations, and when the individual can get compensation for any assault, the latter is has an incentive to disclose any case f sexual harassment. Three quarters of Lebanese women are sexually harassed; Lebanese women do not know exactly what sexual harass- ment means, and confuse it with rape. Therefore a clear regulation of sexual harassment is needed. Improvements on two levels can be made regard- ing sexual harassment in Lebanon. The first level is laws and regulations issued by the parliament. The second level of improvement should be made on a popular level (awareness campaigns-NGOs should be more-educate Lebanese women when it comes to sexual harassment and their rights).

According to an article on Moheet.com, a statis- tic, conducted by the Lebanese NGO called Kafa, reveals that three quarters of Lebanese women are sexually harassed. This number reveals that Lebanese women do not know their right as stated in the Constitution; Equality between men and women. Lebanese women still fear the outcomes of talking about sexual harassment incidents. By having such a tolerant society, Lebanese women do not know exactly what sexual harassment means, and confuse it with rape.

Therefore a clear regulation of sexual harass- ment is needed for the following purposes:

• Define exactly to the public what sexual harassment means.

• Create a less hostile work environment for women.

• Promote equality between men and women as the constitution already promotes.

SOLUTIONS ON HOW TO AVOID THE NEGATIVE AND PROMOTE THE POSITIVE

Comparison of impact of the two extremes of the laws spectrum: no laws versus very tight laws. When having a highly regulated relation environ- ment, gender segregation will occur because of fear of the consequences of any explainable incident.

A good example would be “the reverse sexual harassment” that could take place in the Arab world because of the many restrictions on relations between men and women. If a woman accuses a man of any small visual contact, the latter can face many charges, and risk his career in the region. This is why fewer men will accept to hold jobs where there will be contact with veiled women. Even if the individual accepts the job, he will be very careful when dealing with the women in the workplace. This environment is not healthy for doing business and it could become hostile because of the gender segregation. In the case of absence of laws and in an environment where people do not disclose incidents, the rate of sexual harassment will be very high. This is why some measure should be taken to help create a healthy environment.

What Can Be Improved in Lebanon

The improvements that should be made in Lebanon regarding sexual harassment are on two levels. The

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first level is laws and regulations issued by the parliament. In fact laws should be issued to protect women at work. However before the issuance of those laws, the legislators have to identify who are the most vulnerable to be harassed among workers? What is the reason for their vulnerability? How can they be protected? How can the law balance between regular relations between employees and women’s right at work? The second level of improvement should be made on a popular level:

• More campaigns to encourage women to disclose incidents should be conducted,

• NGOs such as Kafa and Salwa should be more active and form a pressure group on legislators,

• Lebanese women should be taught what sexual harassment really is, and what the misconceptions are, and

• Lebanese women should know their rights but also their duty bit to abuse of the laws.

SEXUAL HARASSMENT DILEMMA: TRUTH VS. LOYALTY

A male manager asks an employee (a woman) for a sexual favor in return to a promotion at work. This case leads to the dilemma. If she did not ac- cept the offer what would she face? Will she lose her current position? Will the manager change the way he treats her? Will he fire her? Will he keep and promote her for nothing in return? Why did he initiate that request for sexual favor? A simple scenario of creating a dilemma is when a manager comes up to an employee and shows the interest of promoting her but in return asks for a sexual favor, which is interpreted internationally, if unwelcome, as sexual harassment.

The dilemma here is that on one hand we have the employee in a confused status and doesn’t know whether she should approve to the harass-

ment, offer or not. If she does approve, then she would get the promotion and improve her career, whereas if she disapproves, she might be fired and face the condition of not finding a job that is as good as her current one. On the other hand, the manager initiated this act only because he requested sexual pleasure and satisfaction. But he also faces a situation where he should have made a choice of whether he should promote her because she is good at what she does or whether he should promote her because he wants favors in return, apparently he decided to go with the sexual favors.

How would you react when faced with such a situation? After the promotion, would he stop harassing her?

Sexual Harassment in Health Sector

Background (United States)

It was not until 1970 that sexual harassment law was developed and implemented (Berlin, 2006). “Societal attitudes about and attention to sexual harassment began to change in the early 1970s with the growth of the feminist movement. This movement empowered women to speak out and seek employment in higher paying positions that traditionally have been filled by men.”However, in 1970s sexual harassment has become an over- riding concern of employers, groups, and associa- tions all over the United States. Nowadays all big companies, government associations, military, collages, and universities have sexual harassment policies in place. (Berlin, 2006)

Furthermore, Berlin (2006) “In 1970 Catharine Mackinnon and Lin Farley and the many other lawyer and activists who represented women in and out of court were able to mount a concerted assault of unprecedented magnitude of force on the practice of sexual harassment.” furthermore, due to the massive pressure exercised by the

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feminist movement, the American legal system had no choice but to gradually respond to these demands, and as a result, they acknowledged and admitted women’s right to work free of unwanted sexual advances.” (Sicgel)

Moreover, women for the first time dared to share their experience and speak out about their experiences at work, this act helped to establish Sexual Harassment law (Sicgel); furthermore, Sicgel said that “the term “Sexual Harassment” itself grew out of consciousness-raising session Lin Farley held in 1974 as part of Cornell Uni- versity course on women and work.”

Berlin (2006) said that “The Civil Rights Act, enacted in 1964, for the first time made it illegal in the United States to discriminate on the basis of race, color, religion, age, national origin, or sex. Title VII of this act specifically prohibited employers from discriminating or harassing on the basis of sex with respect to compensation, terms, conditions, or privileges of employment.” However, congress adjusted the existing law in a way that allows victims of sexual harassment to be compensated (Berlin, 2006).

Brandeis (2004), “American law about em- ployment discrimination grows from several sources: statutes passed by Congress and by the states (known as statutory law) that ban such dis- crimination, and judicial decisions about exactly when and to whom those laws apply made by the relevant federal and state courts (known as case law, since these decisions are made in individual cases).” Case law is just as obligatory as legal law; judges rely on it for all future cases.

Brandies (2004), Timeline overview of the major pillars of American sexual harassment law:

1. 1787 US Constitution is ratified1964 Civil Rights Act of 1964 passed. U.S. Congress passes the civil Rights Act of 1964, which bans discrimination based on race, color, reli- gion, sex, or national origin in situations that include voting and public accommodations.

2. In 1979, legal scholar and feminist Catherine Mackinnon published in her book “Sexual Harassment of Working Women” a concept called “sexual harassment,” a term that, oth- ers have reported, grew from discussions within the 1970s feminist movement.

3. Later, sexual harassment is a civil violation of the 1964 Civil Rights Act’s Title VII.

4. 1980 EECO Wrote clear and specific defini- tion about “sexual harassment” distinguish- ing between “quid pro quo” harassment and harassment1986 Supreme Court declared sexual harassment to be sex discrimination.

5. In 1991 Civil Rights Act of 1991 passed. 6. 1995 Government Accountability Act

passed. 7. 1997 Supreme Court declares same-sex

harassment is illegal. 8. Finally, 1998 Supreme Court define and

provide criteria that protect employers from legal action.

Furthermore, Kaye, (1996) said that “the American Nurses Association (ANA), estab- lished in 1896, has taken a stand against sexual harassment in the workplace by developing and promulgating its Position Statement on Sexual Harassment.” In general, due to strict application of sexual harassment law in many organizations, sexual harassment cases show that since the year 1997 harassment reports have decreased tremen- dously (Business law, 2001). On the other hand, ANA, (2012) reported that “like other occupations the occurrence of SH in nursing is high, one may even argue that it is a normative experience for the nurse, rather than a rare occurrence. Some studies showed that from 69% to 85% of nurses reported experiencing some form of sexual harassment”

Background (Lebanon)

Although Lebanon is considered more “West- ernized” than its neighbors in the Arab world, it

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does not penalize what the West would consider sexual harassment, such as unwanted comments or touching.” (AFP, 2010, Para.6)

AFP, (2012) reported that “On a daily basis, local women continue to suffer from harassment in the streets, at workplace or while using public transport.”

As mentioned in AFP, (2010, Para.8), “accord- ing to a 2007 study by the social affairs ministry, three complaints of harassment and rape are filed in Lebanon each week. But activists say the figure falls far short of the reality.”

Now Lebanon, (2008) said “The Lebanese con- stitution is clear on the equality of rights between males and females, but with the exception of cases of rape, there are no specific laws or penal codes that prohibit sexual harassment.” In the light of this, Mulabi, (2012, Para. 23) suggested that “the Lebanese civil society should urge the Lebanese parliament to pass the bill that protects employees mainly women form sexual harassment.”

One significant problem is that sexual violence of all kinds is under-reported in Lebanon for a variety of reasons. The underlying problem is that there is no specific law that protects females from the various forms of sexual harassment, let alone a clear definition of the term itself; the definition of sexual harassment is restricted to an actual physical act, which most probably hides the real magnitude of the phenomenon. This is in part because “no one is coming forward and breaking the wall of silence,” this leads to a culture of under-reporting and a lack of awareness (Now Lebanon, 2008).

Moreover, Now Lebanon, (2008) reported “the Lebanese society is still macho and systematically places the blame on the woman, “even police mock women who come in to their station to file complaints of harassment or domestic violence” There are legal and social inadequacies that en- courage sexual harassment in Lebanon. Because there are no systems that convict harassers and there is no law to criminalize it, Adventures of

Salwa, (2009) reported “harassment is made to seem normal and harassers do so because they can and because everybody does it.”

In addition, because sexual harassment is still a taboo and is not acknowledged as a problem in our society, there is no clear definition that let us say: yes what happened is certainly harassment. Therefore, the first step toward ending sexual harassment is to break the taboo surrounding it. The law failure to protect women from sexual harassment at work, didn’t, of course, pass un- noticed, the fusion of feminist advocacy, such as Kafa, Nasawina, Amel association, among others, adapted mission to work towards eliminating all forms of gender-based violence and abuse of women.

In Lebanon, according to Mogul (2012) “dis- crimination exists within all societies, no matter how small or large the community”. Amel Associa- tion’s project highlights a kind of discrimination not many of us are aware of: discrimination against females in Lebanon’s healthcare sector. Targeting a few hospitals and medical centers where Amel offices are placed and are well known, the study aimed to understand the general situation of gen- der discrimination and violence against women in Lebanon, with a particular emphasis on the healthcare sector. The study was conducted by two professors from the University of Bologna in north Italy and included focus group discussions, interviews, and talks with the Ministry of Health in Lebanon and the Ministry of Social Affairs. With a response rate of 89.46%, the investigation provided some startling results (Mougul, 2012):

• 43.8% believe that women working in hos- pitals suffer from discrimination, violence, sometimes abuse and sexual harassment.

• 31.3% highlighted discrimination with the tasks given to male and female nurses, with females getting more demeaning and un- dermining tasks.

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• 56.6% talked about verbal abuse, verbal harassment and verbal mistreatment of fe- male nurses.

• 45.1% talked about physical abuse, physi- cal harassment and physical mistreatment of female nurses.

• 66.3% of discrimination towards female nurses comes from the patients and their families.

• 37.9% of discrimination towards female nurses comes from doctors.

CASE: SEXUAL HARASSMENT

At Department of Radiology in a Medical Center, Susan during her training experienced sexual ha- rassment from her director. It all began with the residency director Joe telling her that she was “the prettiest resident that we’ve ever had.” Sometimes “the sexiest resident we’ve ever had.” On many of these occasions Joe would sit down and chat with the Susan about topics that made her feel “very uncomfortable.” At times Joe would tell her that he had an “unhappy marriage” and that often his wife was “too busy” or “simply disinterested” in meeting “his needs. He also asked her whether she had “a boyfriend” on other occasions the director invited the resident to join him for dinner, “so that we can talk more privately”. On all these occasion Susan made it very clear to Joe that his behavior is bothering her and “she doesn’t want to hear or talk about personal things.” She also declined all of his invitations for dining or movies.

Susan first spoke with a colleague about what is happening with her, she told her “rumors were prevalent” that the residency director was a “ladies’ man” knowing that no one have ever lodged a complaint against the director before she requested a private meeting with the department chair. During this meeting she complained about Joe’s behavior and the chair promised to look into the matter. As a consequence, Joe avoided any

contact with her, ignored her, and started to favor someone else. What bothered her is that she felt discriminatory treatment from Joe.

Lebanon Case

“Do you want your reputation to be tarnished? A man would not make this move unless he is ‘in- vited’!” that’s mainly the Lebanese mentality when it comes to sexual harassment. Sarah graduated as a nurse in the year 2008, her mother died and she had to take care of her father. Sickness with no medical insurance means we need money . . . she needed a job like many others fresh graduate, in a society with high unemployment rate, it took Sarah one year from graduation to get employed, she started to work as a nurse for Beirut hospital with this great team. Working hard to prove herself from the start, Dr. Nader among others was really supportive and understanding.

Later on Sarah realized that his eyes would follow her wherever she goes and he would give here undue attention, taking liberties to touch Sarah on her shoulders, greeting her by saying “bonjour yammer” which she thought was a bit weird but did not give it much thought. However, another time in the operation theatre a needle pierced her hand and he said “ah”. Dr. Nader said, “Nice sound, like you are having sex.”

Dr. Nader doesn’t call Sarah by my name. He always calls me from behind and puts his hand on her bra strap. Many times she has just shrugged away at the touch. He will then look at Sarah like nothing has happened. And so on …..Such incidents happened frequently; it left its marks on Sarah’s behavior, she became depressed, anxious, and angry not knowing what to do and how to stop him, without jeopardizing her job. All Sarah could do was talk to her friend about what’s happening trying to get her advice on the line of action she should follow.

Her advice was, “if you want to keep your job try to ignore Doc. Nader and get out of his way.

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“Easier said than done” she added to Sarah “don’t you know everyone would say that you provoked him and eventually you’ll be blamed …“unfortu- nately that’s our society. Needless to say, many nurses suffer and don’t discuss this with anyone; unlike other countries you cannot report harass- ments, because you will be judged negatively if not fired. Complaining here is of no use, one has to have one’s own strategy for survival…

Comparison between the Two Cases

The American nurse with the assistance of her attorney succeeded in preserving her rights, and settling the case to her advantage and the nurses’ cause. Actions taken against the harasser were significant and of a magnitude that refrains others form following suit. Hospital course of action:

1. The staff radiologist was relieved of his position as residency director.

2. Financial settlement was paid for the nurse. 3. The hospital promptly instituted a sexual

harassment policy and grievance procedure that was circulated to all employees and personnel.

What can we conclude? The nurse was able to stop sexual harassment by reporting the incidents and confronting the harassers. Why?

1. Mainly, she knew her right and was not afraid to come forward and confront the harasser. The nature of the society that is supporting in such case.

2. Awareness in the society regarding sexual harassment.

3. Policies and procedures strictly prohibiting sexual harassment are well publicized and supported strongly by government.

4. Availability of labor law and other legislation that restrict such acts.

On the other hand, looking at the Lebanese nurse that experienced sexual harassment at work, how she dealt with the situation?

1. She shared the incident with her friend only, knowing that she can’t get any help.

2. She lived in a dilemma thereafter, she could not take action against the harasser, and fight for her right, as human being, and at the same time couldn’t get over it, yet she had to keep her job for her living.

Reasons behind her deed?

1. The mentality of the Lebanese society. 2. Lack of awareness among employers and

employees, of what sexual harassment is. 3. The absence of laws and the lack of enforce-

ment of existing ones. 4. The health sectors will not treat harassment

complaints seriously and sympathetically. 5. No policies and procedures adapted by health

sectors that harassed employee can follow, nor employee manual/personnel policies.

Comparing the two cases, we find that having laws, regulations, clear procedures, social aware- ness, helped the American nurse to deal with the issue. Whereas, this was not the case with the Lebanese nurse, as our regime lacks all the neces- sary drivers to overcome such similar issue. This highlights the importance of the above mentioned key drivers in overcoming sexual harassment phenomena. It is very important at this stage that we look at how other countries are dealing with such issues and follow their lead.

In conclusion, even though laws and regula- tion may not stop sexual harassment act but for sure it will reduce its occurrence. In Lebanon, we need to break the barriers that are hindering the advancement of establishing necessary laws and regulations that deal with sexual harassment

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problem at its roots. It is the time that law is modi- fied, and zero tolerance sexual harassment in all organizations is adapted.

Sexual harassment is an extremely serious issue that will cause tremendous damage to the victim, the organization and society if not taken seriously.

Therefore, companies/hospitals/organizations/ health sectors must establish a policy in order to protect its employees’ wellbeing as well as its own by providing them with a comfortable work environment and by constantly informing them of what is work-ethical and what is not.

To overcome this serious issue that causes serious damages to the sexually harassed victims, the following need to be done:

1. The legislators should pass a comprehensive law dealing with sexual harassment.

2. Law should be properly enforced with ap- propriate punishment schemes that will help reduce this phenomena.

3. And to have a comprehensive policy state- ments that include a detailed description of the complaints procedure and the manner in which an investigation will be conducted.

4. Awareness-building and campaigns; aware- ness and public education form the founda- tion of any campaign. This can range from organizing forums and seminars, producing and distributing leaflets, to organize gather- ings that will help to raise awareness (ILO, 2001, p. 46, Para.2).

5. Raising awareness of the general public in order to break the Taboos. To help abolish Ignorance about sexual harassment at work.

6. The feminist movement that encourage women to speak out for their rights.

ACTUAL RESOLUTION

International Labor Office, (2001, page xvii, Para. 3) said that “At the national level, a majority of countries have adopted some form of legislation

either through specific legal provisions on sexual harassment or by addressing it under another broader statute such as human rights or equal opportunity and treatment.” In an ever-growing number of industrialized and developing countries, specific legislation or provisions are being adopted to address the issue explicitly, not only providing direct remedies for complainants but also placing legal liabilities on employers to take action in the workplace. In addition to this, numerous trade unions and several employers’ organizations as well as individual employers have adopted policy statements against sexual harassment, or devel- oped workplace policies that address the issue in tandem with national legislation. (ILO, 2001, p. xviii, Para. 1)

Unfortunately, Lebanon is not one of these countries, and has no law of any type that ad- dresses sexual harassment in any of its forms! Nurses working in health centers explained that there are no specific rules and regulations that dictate what measures should be taken in case of asexual harassment incident in the health center. They added that what usually happens is, the su- pervisor or director in the health center takes the lead and interfere to resolve the conflict and try to help the victim overcome the problem. (Deep, 2003)Whenever the patients are the source of the violent incident, it is taken for granted that the health worker has to tolerate the patients’ behaviors as long as he/she can stand it.

The nurses working at hospitals said that in case of a sexual harassment incident they had to fill some papers and complain to the head nurse, who in turn informs the director. Unfortunately, nurses do not go through this because they know that not only it will not help them in anyway but also it might affect them negatively especially when the aggressor is a physician (Deep, 2003).

Regardless of the situation, we find many feminist activists such as Amel Association, Kafa, Nasawiya, along with NGO, UN, and ILO organizations have been working on women issues in Lebanon, but mostly none of them are work-

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ing on women issues in the health care sector. Until recently, Amel Organization launched their 3-year project in February 2009, Funded by the European Union and run by Amel Association, with Italian partner, Costas, as their implementing partner, enhancing the status of Lebanese women in healthcare.(Mogul, 2012)

In addition, Nasawiya, a feminist collective, was established on January 2010, working on gender justice in Lebanon. Through them, the adventures of Salwa was established on October 2011, they have started a campaign against sexual harassment, and are advocating for changes in the Lebanese labor law. In addition, they have orga- nized discussion groups about sexual harassment where women share experiences and opinions, they established support line, and organized workshop against sexual harassment in many universities.

PROPOSED RESOLUTION

As with every employee, health sector employees have the legal right to work in an environment that is free of sexual harassment. It is the responsibil- ity of the organization, the employees, society, as well as, the government to help abolish or at least minimize such phenomena. Responsibility for discouragement of harassment involves commit- ment and action from government, employers and employees (Kaye, 1996). As mentioned earlier in the report by Now Lebanon (2008), “the Lebanese constitution is clear on the equality of rights be- tween males and females, but with the exception of cases of rape, there are no specific laws or penal codes that prohibit sexual harassment.”

According to ILO, (2001, p. 109, Para. 3) “It’s true that effective legal remedies are necessary. However, the main aim of most victims of sexual harassment is not to sue their employer for dam- ages, but that the offensive behavior should stop, that it should not recur and that they should be

protected against retaliation for having bought a complaint.” Therefore, the most effective way to deal with sexual harassment is to develop and implement a preventive policy at all health sec- tors level.

Health care facility employers have a legal responsibility to work with medical staff members and nonemployees to keep the workplace from be- ing a hostile environment and employees free from sexual harassment. Health sectors most provide a comprehensive Code of Conduct that addresses harassment as an issue and how to report it and escalate it as deemed appropriate. Hospitals ought to communicate clearly its rules and regulations to its employees regarding prohibited code of conduct, and ensure that employees have access to help in an easy and confidential set up. Moreover, all employees or/and non-employees who have business contact with employees must comply with company’s code of conduct.

In addition, the Code of Conduct should be backed up with comprehensive procedures that act as guidelines for employees to follow in case they were subject to any prohibited harassment action; these guidelines should specify ways of reporting incidences of sexual harassment such as a secure confidential hot-line. However, the health sectors responsibilities does not end here, but further steps are needed such as taking prompt and necessary steps to investigate the submitted petition or complaints and finally take prompt corrective action, all of which are handled with high confidentiality.

Furthermore, the health sectors policies, guidelines, and corresponding corrective actions should all be supported by the enacted Labor laws and regulations regarding “sexual harassment at work” which makes the penalties and punishments applied in such cases clear. Moreover, having tone at the top that has zero tolerance to sexual behav- ior, and dealing severely with any reported case of sexual harassment incidents sets precedence.

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What’s the point of having policies, training, and hot-line if the companies have tolerance for this behavior?

However, stopping sexual harassment at work, in general, and specifically at health sectors, in Lebanon is a long process that does not simply stop by applying strict policies at work, it for sure will help but other major things need to be done, and these include; raising awareness of the general public in order to break the Taboos. Awareness- building and campaigns, awareness and public education form the foundation of any campaign. Women and workers’ organizations can be active and creatively use various means to increase pub- lic knowledge of issues that affect women. This can range from organizing forums and seminars, producing and distributing leaflets, to organize gatherings that will help to raise awareness (ILO, 2001, p. 46, Para.2).

Recommendations for Solutions

• A clear, detailed policy that specifically outlines the organization’s position against sexual harassment.

• A complaint procedure that encourages employees to come forward with any ha- rassment complaints.

• An investigative strategy that protects the privacy interests of both the alleged victim and the accused offender.

• Periodic management training and employ- ee-awareness programs that communicate the organization’s position on this issue.

On the Individual Level

On the individual level, victims of sexual ha- rassment at work should work on the following procedures:

1. Communicating the disapproval. 2. Keep a record. Victims should note down

the date, time, and details of each incident and the response of the harasser.

3. Find a confidant. 4. Formal complaint. 5. External resources. 6. Quit.

LESSONS LEARNED

Based on the findings, discussion and research info found about sexual harassment around the world and in Lebanon specifically, we can conclude that the following lessons were learned:

The effects of sexual harassment in the work- place: such acts can negatively affect the productiv- ity, culture and communication in the workplace.

Researching the consequences of sexual ha- rassment on nurses health sectors, findings were as follows: Most of the female nurses working in health sectors, “being the victim of sexual ha- rassment, verbalized the following psychological consequences; feelings of discomfort, embar- rassment, indifference fear, humiliation, shame, disgust, depression, anxiety, anger, loss of self esteem, sense of helplessness, low confidence, anger, irritability, nervousness, sense of alienation and disillusionment” (Deeb, 2003).

In addition to this, “sexual harassment also effects health sectors employees professional behaviors like decrease work motivation, decrease work efficiency, increase rates for transfer, resign- ing from the job and withdrawal from the work place. None the less sexual harassment also ruins health sectors employees’ physical wellbeing that includes decrease skill level, increase rates of er- ror, nausea, headaches and tiredness. Thus it was found that sexual harassment has very destructive

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effects. It not only disturbs the individual life but it ultimately decreases the image of the institu- tion” (Deeb, 2003).

Regardless of the different cultures, back- ground of the two nurses (mentioned in section IV and V) being American or Lebanese or form any other culture in the world, the consequences of sexual harassment at work is the same. This fact imposes the following question. Is sexual harassment at work, in general and specifically heath sector being handled the same by the two countries?? Well the answer is obviously, NO.

OPINION

In the United States, it is estimated that ignoring problems of sexual harassment can cost the av- erage company up to $6.7 million a year in low productivity, low morale, and employee turnover and absenteeism, not including litigation or other legal costs.

To avoid damages of sexual harassment, compa- nies should act BEFORE the harassment occurs. Employers should take all necessary steps to pre- vent the harassment from taking place. Examples of steps that can be taken are:

• Affirmatively raising the subject. • Expressing strong disapproval. • Developing appropriate sanctions. • Informing the employees of their rights

concerning how to raise the issue of sexual harassment and who to raise this issue to.

But first, companies need a clear, compre- hensive and a detailed policy regarding sexual harassment and the policy should be available to all employees and should be signed on after read- ing it before enrolling in the company. This policy

should be signed by all employees, supervisors and managers, and also, in some companies it should be signed by non employees who are frequently present at the firm (like sales representatives).

Supervisors should help the employees to understand well the term of sexual harassment, because it could be in many forms, from a joke to distributing e-mails with sexual material. Post- ing photographs of sexual content or romancing subordinates. To help employees gasp the nature of sexual harassment, companies should provide employees with examples of conducts that are considered as sexual harassment by the policies of the company and by law.

FUTURE TRENDS

Focusing mainly on sexual-advance forms of harassment, in the lives of women, less is known about the gender harassment of women, or about any kind of harassment of men. “The underrepresentation of women in a workgroup relates positively to increased odds of women experiencing gender harassment, but not sexual- advance harassment. For men, the opposite pattern emerges: underrepresentation does not increase men’s risk for either type of harassment, instead relating to decreased odds of harassment in some contexts” (Kabat and Cortina, 2014). “In light of theories of tokenism, gender stereotyping, and sex role spillover in organizations, findings support the recommendation that, to reduce harassment (whether it is illegal or legal, gender- or sexuality- based, targeted at women or men), organizations should strive for gender balance in every job at every level. For male-dominated contexts, this implies a need to recruit, retain, and integrate more women throughout the organizational hierarchy”. (Lundy et al, 2013) An intersectional approach that appreciates both sexual harassment as well as the

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racial climate, concludes with recommendations for incorporating both strands of literature into research on educational environments.

CONCLUSION

Sexual Harassment is an issue that was raised when women joined the workforce, and a repro- duction of the men/women role in society was reproduced inside the workplace. Female activists have demanded laws to protect women against discrimination or mobbing in the work place. There are different sets of laws in countries around the world based on history, culture and context. Laws vary from very strict to absence and each extreme represents a negative aspect. This is why a good and fair set of law needs to be implemented. The set of laws should recognize women’s rights but also accept employees’ relations in order not to create gender segregation.

REFERENCES

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AFP. (2010). Victims of harassment speak out in Lebanon. AFP.

American Nurses Association. (2012). Ethics. Author.

Berlin, L. S. (2006). Article. The American Journal of Roentgenology: Sexual Harassment.

BIO-Medicine. (2009). Doctors, nurses face sexual harassment at work. Author.

Business Law. (2011). The quick statistics on sexual harassment. Author.

Chan, D. S., Chun Bun, L., & Suk Yee, C. (2008). Examining the job-related, psychological, and physical outcomes of workplace sexual harass- ment: A meta-analytic review. Psychology of Women Quarterly, 32(4), 362–376. doi:10.1111/ j.1471-6402.2008.00451.x

Clarke, L. S. (2007). Sexual harassment law in the United States, the United Kingdom and the European Union: Discriminatory wrongs and dignitary harms. Common Law World Review, 36(2), 79–105. doi:10.1350/clwr.2007.36.2.79

Daily Star Newspaper. (2012). Beirut based NGO opens sexual harassment support line. Daily Star Newspaper.

Deeb, M. S. (2003). Workplace violence in the health sector: Lebanon country case study. Aca- demic Press.

Equal Rights. (2012). Know your rights: Sexual harassment at work. Author.

Farr, K. S. D., & Cortina, L. (2014, February). Sex-based harassment in employment: New in- sights into gender and context. Law and Human Behavior, 38(1), 58–72. doi:10.1037/lhb0000045 PMID:23914922

International Labor Office. (2001). Action against sexual harassment at work in Asia and the Pacific. Author.

Kaye, J. (1996). Sexual harassment and hostile environments in the preoperative area. Academic Press.

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Leonard, A. S. (2004). Sexual minority rights in the workplace. Brandeis Law Journal, 43, 145.

Lundy-Wagner, V. M., & Winkle-Wagner, R. L. (2013, March). A harassing climate? Sexual harassment and campus racial climate research. Journal of Diversity in Higher Education, 6(1), 51–68. doi:10.1037/a0031576

McCabe, M. P., & Hardman, L. (2005). Attitudes and perceptions of workers to sexual harass- ment. The Journal of Social Psychology, 145(6), 719–740. doi:10.3200/SOCP.145.6.719-740 PMID:16334516

Merkin, R. S. (2008). Cross-cultural differences in perceiving sexual harassment: Demographic incidence rates of sexual harassment/sexual aggression in Latin America. North American Journal of Psychology, 10(2), 277–289.

Mougul, P. S. (2012). Equality for women: Leba- non demands less gender discrimination in their healthcare sector. Academic Press.

Mulabi. (2012). Report on Lebanon. Author.

Now Lebanon. (2008). The reality of harassment: Sexual violence still under-addressed in Lebanon. Author.

Now Lebanon. (2012). Sexual harassment in Lebanon. Author.

Nurse, M. (2010). How to recognize and respond to sexual harassment in the workplace. The Mas- sachusetts Nurse, 81(1), 20.

Schuster Institute for Investigative Journalism. Brandies University. (2004). Timeline U.S. legal history of sexual harassment: Statutory and case law as it relates to teens. Author.

Sexual Harassment Canada. (2012). Statistics. Author.

Sicgel, R. S. (2012). A short history of sexual harassment. Academic Press.

Stop, V. A. W. (2012). Effects of sexual harass- ment. Author.

Van Wijk, C., Finchilescu, G., & Tredoux, C. (2009). Sexual harassment of women in the South African Navy. South African Journal of Psychol- ogy. Suid-Afrikaanse Tydskrif vir Sielkunde, 39(2), 169–183. doi:10.1177/008124630903900203

Vijayasiri, G. (2008). Reporting sexual ha- rassment: The importance of organizational culture and trust. Gender Issues, 25(1), 43–61. doi:10.1007/s12147-008-9049-5

KEY TERMS AND DEFINITIONS

Activism: Translation of a conviction and commitment to principles or value systems into sustained patterns of activity.

Awareness: Recognition of the mind by in- dividuals or groups for the existence of an issue.

Culture: Way of life translated by traditions, customs, norms, and value systems.

Discrimination: Differentiation in treatment of individuals or groups enforced by bias and prejudice and resulting in social stratification.

Harassment: Unwelcome aggressive behavior in attitude words or actions resulting in unwelcome response.

Litigation: Dispute by differing parties toward settlement of grievance by court justice.

Sexuality: Implicit and explicit behavior in attractions among individuals.

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http://dx.doi.org/10.1037/a0031576

http://dx.doi.org/10.3200/SOCP.145.6.719-740

http://www.ncbi.nlm.nih.gov/pubmed/16334516

http://dx.doi.org/10.1177/008124630903900203

http://dx.doi.org/10.1007/s12147-008-9049-5

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APPENDIX

Learning Objectives

L.O.1: Define sexual harassment. List and define the types of sexual harassment. L.O.2: Determine the reason for implementing sexual harassment laws. L.O.3: Discuss the impact of issuing sexual harassment laws on the work environment. L.O.4: State the part being protected by the sexual harassment laws. L.O.5: List the types of employees who are mostly affected by sexual harassment. L.O.6: List the disadvantages of sexual harassment laws. L.O.7: Describe why sexual harassment is a significant problem in Lebanese health sector. L.O.8: Contrast the difference in perception of sexual harassment between Lebanon and the United Sates. L.O.9: Determine whether the absence of direct and specific sexual harassment laws makes a difference

in Lebanon. L.O.10: List improvements that should be made in Lebanon regarding sexual harassment.

Summary

Define Sexual Harassment

A general legal definition of sexual harassment is any unwelcomed physical or oral sexual advances in exchange of a certain reward, or by intimidation of the harasser’s superior position. It can take both verbal and/or physical forms between people from the same or opposite sex. Unwelcome verbal, visual, or physical conduct of a sexual nature that is severe or pervasive and affects working conditions or cre- ates a hostile work environment.. There are two principal types of sexual harassment in the workplace:

• Quid Pro Quo Sexual Harassment: Harassment refers to a demand by a person in authority for sexual favors in order to obtain or maintain certain job benefits.

• A Hostile Working Environment: Refers to unwelcome sexual advances, requests for sexual favors or other verbal, non-verbal or physical conduct of a sexual nature which interferes with an individual’s work performance or creates an intimidating, hostile, abusive, offensive or poisoned work environment.

Determine the Reason for Implementing Sexual Harassment Laws

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Sexual Harassment Laws and Their Impact on the Work Environment

Discuss the Impact of Issuing Sexual Harassment Laws on the Work Environment

Many companies were held liable of employees’ sex related discrimination, because the firms did not have internal systems to fight sexual harassment. Then to avoid expensive lawsuits, companies started implementing internal policies to hold individual employees liable.

This increase in protection for female workers created a safer environment and paved the way for women to become the majority of the workforce.

State the Part Being Protected by the Sexual Harassment Laws

A good sexual harassment law preserves the right of the persons needing it, while being fair to everybody else. When the first sexual harassment laws were introduced they were intended to protect women in general as women are more likely subject to sexual harassment than others.

List the Types of Employees Who Are Mostly Affected by Sexual Harassment

The type of employees who are the most exposed are: employees, who have low salary; lower level of education; young single women. The main effects on the victims of sexual harassment include:

• Psychological stress and health impairment. • Decreased work or school. • Being objectified and humiliated by scrutiny and gossip. • Having one’s personal life offered up for public scrutiny—attack. • Defamation of character and reputation. • Loss of trust in environments similar to where the harassment occurred. • Having to relocate to another city, another job, or another school. • Loss of references/recommendations.

List the Disadvantages of Sexual Harassment Laws

The cons of sexual harassment laws are:

• They present a conceptual problem by violating equality right: women are getting special treat- ment because they are women.

• They create under-inclusive and over-inclusive observations of the case. • The law being over-inclusive creates a separation between males and females, which builds a more

hostile environment. • Firms applied harsh employees’ inter-relations policies to avoid expensive lawsuits. • Any suspects are pitilessly punished. • Some firms used sexual harassment as an excuse to fire employees.

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Describe Why Sexual Harassment Is a Significant Problem in Lebanese Health Sector

In Lebanon, there are legal gaps that encourage sexual harassment in society, there’s nobody there to challenge this behavior, and there are no laws to criminalize it, harassers do it because they can.

There are legal and social inadequacies that encourage sexual harassment in Lebanon. There are no specific rules and regulations that dictate what measures should be taken in case of asexual harassment incident in the Lebanese health center. Whenever the patients are the source of the violent incident, it is taken for granted that the health worker has to tolerate the patients’ behaviors as long as he/she can stand it.

Contrast the Difference in Perception of Sexual Harassment between Lebanon and the United Sates

Lebanon and the United States have a different view of sexual harassment. In Lebanon no clear laws protect women as opposed to the United States. Also as a general tolerance Lebanon is more tolerant that the United States. The difference in cultures also contributes in people’s willingness to disclose ha- rassment. In the United States, people are used to the concept of right and judicial system that preserves it. As opposed to Lebanon where such a matter is taboo, and people are discouraged to disclose for the sake of preserving their reputation.

Determine Whether the Absence of Direct and Specific Sexual Harassment Laws Makes a Difference in Lebanon

Three quarters of Lebanese women are sexually harassed; Lebanese women do not know exactly what sexual harassment means, and confuse it with rape. Therefore a clear regulation of sexual harassment is needed.

List Improvements That Should Be Made in Lebanon regarding Sexual Harassment

Improvements on two levels can be made regarding sexual harassment in Lebanon. The first level is laws and regulations issued by the parliament. The second level of improvement should be made on a popular level (awareness campaigns-NGOs should be more-educate Lebanese women when it comes to sexual harassment and their rights). Development and adoption of a nationally accepted explicit defini- tion of sexual harassment.

• Broad scope of protection to cover as many persons as possible. • Delineate clearly the liability of the employer and the alleged harasser. • Provide affirmative duties to act towards the prevention of sexual harassment. • Ensure fair, clear and suitable procedures of due process for both accused and claimant covering

filing and hearing of complaints, investigations evidence, burden of proof, protection of confiden- tiality and privacy.

• Protect against victimization.

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• Provide for a wide range of damages, remedies and sanctions that both punish and deter harassing conduct.

• Supplement legislation with guidelines. • Establish an administrative body or mechanism with resources and competence to handle com-

plaints and promote application of the law.

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Chapter 5

DOI: 10.4018/978-1-4666-7254-3.ch005

Monopoly Abuse

ABSTRACT

Monopoly is the case when a firm provides products or services to which there is neither competition nor a near substitute, dictating price and quantity produced. Monopolies raise concerns of unethical business practice because they perform acts of conspiracy and collusion. Consumers will be buying needed products at unfair prices and questionable quality standards. The instrumental approach is when a company performs monopolistic behavior in order to maximize company profits and satisfy corporate shareholders. The social approach is when a company seeks the good of the greater environment, look- ing beyond the benefit of shareholders. Monopolistic behavior may provide certain positive advantages like helping expand different industries, generating a lot of capital into the business cycle, introducing innovation, and bringing a solution to some major economic problems. Disadvantages of monopolies are mal-distribution of the social product, decreased economic national growth, and increased unemploy- ment levels, blocking competitive markets, and lacking socio-economic efficiency. This chapter explores monopolistic abuses.

INTRODUCTION

Monopoly power is an economic concept that many consumers want to avoid, since the seller benefits from charging a high price in order to increase revenue, while passing on the burden to consumers. According to Reed, “a monopoly is against the public interest and is unlawful” (Reed, 1916). Many economists believe that monopolies affect the price structure of the market through “higher prices, unfair dealing, restricted supply, and lack of freedom to enter the market” (DeMarco, 2001). Therefore, competition is highly required

for the market to operate effectively especially in markets where goods and services are considered as necessities.

A market operates efficiently only at equilib- rium price and any factor that reduces competition would be considered unjust (DeMarco, 2001). This unjust behavior is also reflected when the monopolist sets a very high price compared to the actual value of the product or service. Therefore, the theory behind unjust pricing is preventing the greatest good for the greatest number of people; this is reflected by the utilitarian ethical theory (Ghillyer, 2008).

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Many anti-trust laws have been introduced around the world to prevent monopolies from operating. The ethical issues related to these anti-trust laws are based on two theories. First, is the theory of universal ethics which states that “universal principles are seen to apply to everyone, everywhere, all the time” (Ghillyer, 2008). The second theory is related to the theory of justice, where people apply “right or wrong” depending on what the law states. Although monopolies are practiced differently in every country, they still have the same outcome on consumers.

In Lebanon many economists and politi- cians are encouraging the privatization of many state-owned industries, because they believe that privatization would end monopolistic abuse and would help the economy prosper through increas- ing efficiency and introducing competition. The telecommunication service companies, which were previously known as “Libancell” and “Cel- lis” were one of the sectors that were privatized in Lebanon. Several years passed after privatization took place and there is still no information about new firms entering the industry. The two compa- nies operating today, which are known as “mtc touch” and “alfa,” function together as a duopoly. This leads to an ethical problem, since most of the services offered in the telecommunication sector are regarded as necessities in today’s global world. These companies are imposing extremely high prices for their services, in which many believe are one of the most expensive in the world. This is one of many examples of monopolistic behavior in Lebanon, where consumers always carry the burden of paying very high prices.

BACKGROUND OF MONOPOLY POWER

Economist William Hutt once stated “Political lib- erty, can survive only within an effective competi- tive economic system” (Hutt, 1936). Those words

remain pillars for economic idealism. However, the business world we live in today is far from idealistic. When a certain firm dominates a sec- tor in the market, it gives birth to a monopolistic face of the market. In the case of a monopoly, a firm would provide products or services to which there is neither a competition nor a near substitute, dictating price and quantity produced. It controls how much consumers sacrifice in order to obtain the monopolized product or service. That is, con- sumers can find no alternative to the monopolistic firm since none exist. According to Hutt, “the enemy of democracy is a monopoly in all of its forms: gigantic corporations, trade associations and other agencies for price control” (Hutt, 1936). It is important to note that a monopoly can never have unlimited power, because of governmental pressure. Governments have taken precautions and counter actions to fight the negative effects of monopolies, especially after the Great Depression of 1929. Though such actions do not terminate monopolies, they do somehow place controlling limits over them.

In some cases, even more, the government is itself the monopoly holder. In the Socialized Medicine: The Canadian Experience, economist Pierre Lemieux discusses the socialized medicine system in Canada. Socialized medicine is a form of monopoly whereby the medical industry is nationalized and thus controlled by the govern- ment. This form of system helps regulate medical care and removes business interest in this industry (Lemieux, 1989). As a result, the medical industry is no longer a for-profit industry, and medical care becomes much more accessible by the general public. Lemieux explains that this system “pro- vides all Canadians with free basic health care: free doctors’ visits, free hospital ward care, free surgery, free drugs and medicine while in the hospital” (Lemieux, 1989).

The main reason that gives rise to monopolistic power is a firm gaining control over the supply of raw materials being used. A good example is the

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petroleum industry. Firms engaging in petroleum businesses race to gain control over the limited supply of remaining petroleum. The limited sup- ply of petroleum gives easy monopolistic market control to representative firms. Governments usually try to enforce rules to prevent monopo- listic behavior in order to maintain efficiency and growth; however, most anti-trust laws are not effective. Anti-trust laws were introduced in Texas to end monopolistic abuse and to increase growth. Joseph A. Pratt explains in his study The Petroleum Industry in Transition: Antitrust and the Decline of Monopoly Control in Oil, “that standard Oil exercised monopoly power in Texas in the late 19th century”, but when the government set new anti-trust laws its operations were ceased” (Pratt, 1980). Although government tried to end monopolistic abuse, “Gulf Oil and Texas Com- pany entered the market and formed an oligopoly” (Pratt, 1980). The Gulf Oil-Texas Company issue presents a clear example of the inability of govern- ments to fully terminate monopolistic behavior over a certain business sector, especially if the raw material used is scarce, such as petroleum.

Monopolistic advantage does not have to be achieved solely through the control over raw material. In the case of EU versus Intel (top PC microprocessor manufacturer), Intel was fined $1.44 billion for monopolistic behavior (White, 2009). Naturally, Intel monopolized the computer chip market through “its marketing strategies rather than through control of the global silicon supply” (White, 2009). In an article issued by the Associated Press in May 13, 2009 by Aoife White, Intel Corp was exposed to having, among several tactics, exploited the market by pressuring top PC manufacturers (Dell, Acer, HP, Lenovo, and NEC) to purchase their CPU’s from Intel and disrupted the launch of PC’s that operated on AMD CPU’s, Intel’s sole surviving competitor. In a quote from EU Competition Commissioner, “Intel has harmed millions of European consumers by deliberately acting to keep competitors out of the market for computer chips for many years” (White, 2009). In

its acts, Intel had broken anti-monopolistic laws set by the EU, and was fined according to the time it had been practicing these illegal acts. While $1.44 billion might seem as a harsh punishment against Intel, actual facts remain that many saw that the EU should have placed stronger punishments against Intel reaching a $3.8 billion. This is to show the effect that monopolistic behavior can have on the environment in which it was practiced.

Some monopolies operate through patents or copyrights; these prevent other companies from producing the same product or service innovated by a person or firm. However, one cannot argue against patents or copyrights since they are a form of protection for intellectual property. They prevent theft of ideas and usually have to do with “want” products rather than “need” products. Other monopolies, however, form when two major companies merge their operations; at this point one can question ethical issues. Microsoft Corporation was said to violate the Sherman Anti- trust Act when it merged Microsoft Windows and Internet Explorer (Chandrasekaran, 1998). In a staggering case against Microsoft “the Justice Department and 20 states allege that Microsoft has used illegal tactics to crush competition in the software industry” (Chandrasekaran, 1998). These illegal tactics were related to the fact that Microsoft did not have any social responsibility toward the public and only operated to maximize shareholders wealth.

Another example in the world of merging for monopoly is the Paramount Pictures Corporation and Du Mont Television Network merger. The merging of what Walter Adams describes in The Quarterly Journal of Economics, 1953 as the “larg- est motion picture producer” (Paramount Pictures) and “the nation’s fourth largest TV network” (Du Mont) created an unequaled television dominant force. Government actions that were taken to pre- vent this merger failed, leaving Paramount and Du Mont to operate as a monopoly (Adams, 1953).

One can distinguish between two different ap- proaches that a company uses to address corporate

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Monopoly Abuse

social responsibility. The first is the “instrumental approach” where, a company would perform monopolistic behavior in order to maximize company profits and satisfy corporate sharehold- ers (Ghillyer, 2008). The second approach is the “social approach,” by which a company seeks the good of the greater environment, looking beyond the benefit of shareholders (Ghillyer, 2008). A company that operates for the benefit of the public and has social responsibility is said to be operating under ethical standards.

Contradictory views over the effect of monopo- ly on consumers exist. These views believe in cer- tain positive advantages monopolies may provide for consumers. When high impact products, for instance pharmaceutical and medical industries, are monopolized by large professional corpora- tions, a minimal standard of quality is set. Con- sumers would not want to encourage competitive products to penetrate the medical industry, since quality standards may be hindered. In this case, the barriers to entry that monopolies face in the pharmaceutical industry would act as a protective measure to consumers. Such an occasional need for a monopolistic party over a certain business sector is the primary cause of a state controlled monopoly. While many economists argue that governments should monopolize industries that are better off left to the competing market, there are certain industries that governments cannot risk going out of control. If public safety is at stake, governments usually keep monopolies. According to Adams, for public policy to take place, “eco- nomic power has to be dispersed among many buyers and sellers competing actively in open markets” (Adams, 1953).

DYNAMICS AND INTRICACIES OF MONOPOLY

Monopolies have been envisaged by many economists as operating against public interest and therefore demonstrating unethical behavior.

In fact, a monopoly by definition is “the power or tendency to control prices” (Reed, 1916). One fundamental argument against firms that practice monopoly power is that “they exploit their posi- tion by raising prices in markets where demand is inelastic, extracting the consumer surplus from buyers and as a result increasing profit margins ” (Riley, 2006). Thus, it follows that producers engage in price discrimination by setting prices that are higher than the actual value of the product or service. The aim of price discrimination is to extract the greatest amount of profits, through the act of setting the highest price that consumers are willing to pay, hence “turning the consumer surplus into extra revenue” (Riley, 2006).

Consumer surplus is “a measure of the welfare that people gain from the consumption of goods and services” (Riley, 2006). Monopolists engage in unethical acts by extracting the consumer sur- plus and benefiting from it. Thus, prices are set above the competitive equilibrium level, where consumers continue to buy the product or service at the higher price. In fact, consumers suffer a loss which is equal to the additional revenue that monopolists gain (Posner, 1975). According to business ethics, this loss or consumer surplus is defined by some philosophers as being the “social costs” of monopoly power (Posner, 1975).

The classical argument by Adam Smith, is another argument against monopoly abuse. This argument is related to the “effect of monopolies on the distribution of resources between different employments and on the distribution of income between individuals” (Boulding, 1945). Monopoly power leads to a “mal-distribution of the social product” implying that resources are forced to remain idle instead of being utilized (Boulding, 1945). In other words, the monopolist is operating against society, thus violating ethical standards of providing the greatest good for the greatest number of people.

Monopoly power also affects the economic growth of nation and its unemployment level. Many believe that a monopoly acts in an unethi-

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cal manner by leading to unemployment in the economy. When a monopoly functions, it sets a high fixed price, preventing factors of produc- tion and the prices of commodities from falling when these downward movements are held to be necessary (Boulding, 1945). Another argument against monopolistic abuse is derived by Thomas Aquinas and is primarily concerned with social justice. According to Aquinas, in any market the exchange of goods and services falls within the boundaries of cumulative justice. This recognizes the relations among individuals, which is based on the “principle of equality” (Roover, 1951). Aquinas believes, the just price is the “competitive price… the one set by the free valuation of the buyers and sellers, or by the interplay of the forces of demand and supply.” Therefore, a monopoly operates in an unethical manner, because consumers are buying the products they need at an unjust price. “a thing is justly worth what it can be sold for without fraud” (Roover, 1951). One can conclude that a monopolist violates the principle of equality by setting a high unjust price.

Aquinas’ theory states that a monopolist sets the basis for exploitation. The price a monopolist charges is severely above the equilibrium com- petitive level, hence, violates cumulative justice (Roover, 1951). Sir Edward Coke and Edward Misselden have extended this theory by stating that “all monopolies are against the Magna Charta, because they are against the Liberty and Freedom of the Subject” (Roover, 1951). Furthermore, monopolistic abuse practiced by bankers “who manipulate the exchange rates in order to create artificial stringency in the money market” have a dramatic effect on the economy and are said to cause the greatest harm (Roover, 1951). Oth- ers believe that monopolistic acts are unethical, because they involve conspiracy. These perfor- mances by monopolies have a negative influence on consumers, since a monopoly functions against public interest and is unjustified by the ethical utilitarian perspective.

Another argument presented against monopo- listic behavior is through the neoclassical theory. This theory argues for a competitive environment, since it is the only environment where a fair and ef- ficient exchange occurs. Monopolies, on the other hand, block competitive markets through “unfair dealing, higher prices, restricted supply, and lack of freedom to enter those markets” (DeMarco, 2001). The market can only operate with entire freedom in a competitive environment, where there is an easy entry and exit into the market. As a conclusion to these arguments, monopolies lack efficiency and are unable to provide freedom for prices to reflect consumers’ demand, therefore harming justice (DeMarco, 2001).

Many economists support monopolistic acts for different reasons. One of the arguments that encourage monopolistic behavior is that they have expanded in different industries, such as agriculture, and have become “the normal state of affairs” (Boulding, 1945). This is related to the universal principle of ethics, where “actions apply to everyone, everywhere, all the time” (Ghillyer, 2008). Therefore, some governments encourage monopolies to function, instead of prohibiting them. Benson highlighted the importance of this theory by stating that, “economists….were not in agreement” of what position to defend in the dis- cussions that gave birth to the Sherman Antitrust Act of 1890 in the United States (Demarco, 2001). Furthermore, Benson states that most economists are against these regulations, because monopolies in certain industries are generating a lot of capital into the business cycle.

Schumpeter and Hayek, “members of the Austrian school” have also generated arguments that support monopolistic behavior in an industry (DeMarco, 2001). Hayek believes that it is nec- essary to distinguish between “bad monopolies” which usually impose high prices on consumers and “good monopolies” which may lead to “a better quality of entrepreneurship” (DeMarco, 2001). Moreover both philosophers believed that

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even if free competition is present in an industry, a monopoly may be formed. Schumpeter supports the presence of a monopoly, by emphasizing that a monopoly can be achieved fairly in certain conditions, such as when it introduces innovation and therefore proves to be a beneficial source to the economy.

Althusius believed that the presence of a mo- nopoly is justifiable under the case of “national emergency” (Roover, 1951). Therefore, a mo- nopoly can be “imposed by the State in order to provide revenue, if it is impossible to raise enough through taxation or other means, or if communi- cations are disrupted by enemy action” (Roover, 1951). The presence of a monopoly functioning in an industry is ethically justifiable, because it could be a solution to some economic problems such as deflation. Deflation is defined as the decrease in prices, which could lead to negative impacts on households and employment in the economy. Therefore, a monopoly could save the society from these negative impacts, since it prevents prices from falling. This argument supports the utilitarian theory of ethics, since it functions to provide the greatest good for the greatest number of people, and therefore protects public interest.

Many economists support monopolistic be- havior by acknowledging the limitations of the theories that are against monopoly abuse. First, the classical theory is said to be a “static theory”, indicating that the ends justify the means and the “process of movement towards those ends are unreasonable” (Boulding, 1945). Furthermore, Aristotle supported the neoclassical theory and stated that “competition is the life of trade and in the interest of the public. The weakness of the neoclassical theory is that it bases its standing on a certain premise and does not examine whether the premise is true. For example, this theory considers the notion that competition is the life of trade as an “eternal law of nature” (Reed, 1916). Therefore, the premise can be considered inac- curate, implying that a monopoly by definition is not necessarily unethical.

MONOPOLY BACKGROUND IN LEBANON

The main reasons that give rise to monopolistic power are:

1. Control over the supply of raw material being used;

2. Marketing strategies; 3. Patents and copy rights; and 4. Merger of operations between two major

companies.

Monopolies can be operating either extremely inefficiently or extremely efficiently. Major ex- amples in a developing economy are Electricite du Liban (EDL), and Middle East Airlines (MEA), both based in Beirut Lebanon. Furthermore, the telecommunication sector in Lebanon is flourish- ing. But, the immense profits generated in this industry are questioned from an ethical point of view because of the monopoly abuse and high prices for the services. Privatization could be the solution. However, state-telecom monopolies are quickly evolving in the Arab World. In order to overcome problems the Arab state-owned tele- coms are required to give up their monopolies by privatizing the industry. This raises a plethora of social concerns, and of business ethical issues.

In order to understand the ethical dilemmas faced under monopoly abuse, one should first acknowledge how monopolies are formed and how they operate in Lebanon. According to many economists and politicians, monopolies that are state-owned cannot be abolished unless they are privatized. The President of the telecommunica- tions regulatory authority, Kamal Shehadi states, “The private sector must be brought in to keep on introducing new technology and make the sector more competitive” (Tohme, 2002). State-owned monopolies operate in Lebanon, because the gov- ernment benefits from their revenues, although most of these companies are running inefficiently and selling overvalued goods and services to

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consumers. Furthermore, Shehadi (2007) states “We need parliament’s cooperation or else priva- tization will not go through” (rebuildlebanon.gov, 2007). Therefore, if the parliament does not pass privatization laws, privatization cannot take place and monopolies would still have the advantage of controlling the market.

Taking a closer look into Lebanon, one can find many monopolies operating. Some companies that are operating as monopolies in Lebanon include Electricite du Liban, Middle East Airlines, and Alfa and Mtc Touch functioning as one entity. By introducing competition to these industries, companies will be forced to work efficiently and decrease costs incurred in production. “Over $1 billion of the revenues of the telecom industry are generated to the treasury” (Habib, 2009). While many support privatization, some politicians and economists hold a conservative view to the act of privatizing these companies, because the revenues generated by these companies are also a source of income to the government.

Although many investors would be interested to invest in the telecommunications industry, no one would find it profitable to invest in Electricite du Liban, since its annual deficit is more than $1.3 billion a year (Habib, 2009). Most consumers do not have full access to electricity in their homes and in return pay a very high price to comple- ment this service. In addition, electricity bills in Lebanon differ from area to area, where most areas in Beirut pay extremely high prices. This also raises an ethical dilemma, as to whether it is fair for some areas to consume the same service for a higher price. The Finance Minister stated, “in order to raise funds, the government can either increase taxes or allow the private sector to get involved” (Habib, 2009).

The price burden that consumer’s carry and the minimal access consumers have to electricity create an ethical dilemma. One of the problems is realized through consumers and their reaction to the high prices paid, where consumers are pro-

voked to steal electricity through different means. Two main ethical theories may be proposed in this situation. The first is the utilitarian theory related to “Electricite du Liban”, where it does not oper- ate to provide the greatest good for the greatest number of people. The second ethical theory is related to consumers and their moral values, since some consumers are committing fraud, shifting the burden of the high price to other consumers.

According to Nash, “MEA’s success was due to the lack of competition.” (Nash, 2008) The Leba- nese airline industry was formerly composed of three companies which were Air Liban, Lebanese International Airways, and Middle East Airlines (MEA). The former two companies failed during the war, giving MEA the opportunity to “stand alone” in the airline industry (Nash, 2008). Fur- thermore, Nash stated that the company’s high profits prevent the state from giving it up and “lifting the shield from local competition” (Nash, 2008). Therefore, one can conclude that state- owned monopolies in Lebanon operate to benefit the government. In order to end monopoly abuse many economists and politicians are campaign- ing for privatization to take place and in return introducing competition to these industries. The question remains as to whether these companies should be privatized in order to introduce com- petition and solve the ethical dilemmas faced by companies and consumers.

TELECOMMUNICATIONS SECTOR IN THE ARAB WORLD

State-telecom monopolies are facing difficulties in the Arab world. In order to survive, they are forced to decrease costs and improve their services, since consumers are looking for different ways to communicate, especially through “Internet telephony” (Martin, 2000). According to Martin, Arab state-owned telecoms are required to give up their monopolies by privatizing the industry.

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Privatization is not an easy decision, since “state- owned monopolies have been a major source of public income” (Martin, 2000). Therefore, the same dilemma is faced by many Arab countries, as whether to forgo the fixed income received and sell the telecom industry or keep the telecom sector operating inefficiently as a monopoly.

“Telecoms are vital for survival in the modern global economy” (Martin, 2000). Phone rates are relatively high in the Middle East forcing busi- nesses and consumers to purchase an overvalued service. Furthermore, the high price sustained is not covered by improved services, because the service networks are too small to absorb all the telephone lines that are being utilized. This poses a problem as to the low quality of the service being provided compared to the high price that consumers are paying.

In 1999, privatization took place in Morocco’s telecom sector. The results were rewarding to consumers, as they experienced “service upgrades, aggressive marketing campaigns, decrease in sub- scription rates and a reduction in tariffs” (Martin, 2000). These are some benefits that privatization can bring along, but many are against privatization, especially if a state-owned monopoly becomes private. A private monopoly is said to cause more harm, because it would be harder to control by the government and may have greater ability to engage in aggressive monopoly abuse. According to Meed, more operators are encouraged to enter the telecom industry in the Middle East, because “it is a young market” and the investment prospectus is distinguished as a strategic one (Meed, 2004).

The telecommunication sector is worth at least $6 billion, where the profits of this industry are flourishing (Habib, 2009). Many economists question whether these immense profits produced by this industry are ethical. Monopoly abuse in Lebanon is evident in the telecom sector, where Mtc-touch and Alfa are currently running Leba- non’s mobile networks, and are operating as a duopoly. Since 2000, the Lebanese government

has been trying to introduce competition through privatizing the telecom sector. According to liberal economists, privatization would enhance investments and reduce costs, where most of the costs that these companies impose are “artificial because a large share of costs per minute of use is taken by government taxes” (rebuildlebanon. gov, 2007). Any factor that reduces competition would be considered an unjust behavior; therefore, the burden of paying high prices for a service that is overvalued defines the ethical dilemma in this industry.

Shehadi believes that if a third network enters the telecom sector “the penetration would jump to 60 percent within four years” (Shehadi, 2004). Therefore, the number of subscribers would in- crease, implying that costs would decrease con- siderably. There are many strategic objectives that can be achieved by liberating the telecom sector such as, the creation of new job opportunities in telecom, improvements in productivity and in the information system. Shehadi further states that through privatization a capital market could be developed by increasing ownership and listing telecom stocks on stock exchange (Shehadi, 2004).

Privatization was mentioned in the ministerial statement as designed to “modernize the structure of the national economy, preserve its stability, and bolster the chances of growth” (Habib, 2009). According to Barakat, Head of Economic Unit Analysis at Banque Audi, “privatization is a means to disrupt the vicious circle of accumulated government deficits”, therefore, privatization is a method to end unethical behavior in the telecom sector (Konrad, 2000). The Lebanese government has a few assets for sale and the telecom sector is they only sector that is considered as a “mouth- watering product” (Habib, 2009). This sector has been improving through better services, but telephone rates are still fixed at high prices. The main problem that consumers are facing is the high rates that are being imposed on them, since consumers in Lebanon pay one of the highest rates

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in the world. This is related to the cumulative justice theory that a monopoly violates (Roover, 1951). The price that consumers pay compared to the services received is extremely high and is said to be unjust. In addition, Mtc-touch and Alfa operate as one entity, thus their acts involve conspiracy against public interest.

Some economists argue for monopolistic pow- ers, because they believe that it is a “normal state of affairs” (Boulding, 1945). Monopolies may operate ethically if they operate under specific laws and have corporate conscience. Corporate conscience indicates that the “organization is run with an awareness of its obligations to society” (Ghillyer, 2008). Many companies in Lebanon operate in chaos, therefore with monopoly power present and without any regulatory body, corpo- rate conscience is hard to achieve. This ethical dilemma is complex, as to introduce competition which may lead to offering a “fair price” or to keep the monopoly operating and benefiting from its vast profits.

FUTURE TRENDS

Sources and types of administrative monopoly and the possible harms that administrative monopoly causes to the macro economy. Arguments for and against the inclusion of provisions on administra- tive monopoly in the Anti-Monopoly Law explain the weaknesses of such provisions. (Wu, 2010)

Many argue that the only solution to protect consumers from monopolistic abuse and promote public welfare is through the “regulation or ad- ministration of a body responsible to the whole community” (Boulding, 1945). A “regulated monopoly” is always preferable, because it may prevent monopoly abuse and in return operate in the interest of the public. Many regulatory procedures and administrative policies have been applied in the various fields of transportation and public utilities, these bodies have prevented monopoly abuse towards consumers (Boulding,

1945). However, such policies should also be en- forced in other fields, especially in sectors where monopolies are not state-owned, such as “land rents” (Boulding, 1945).

Moreover, monopolistic abuse is usually present in “a highly unstable oligopoly” (Bould- ing, 1945). This situation is characterized by “alternative periods of destructive price-cutting and quasi-monopolistic agreements” (Boulding, 1945). These acts sometimes come to the benefit of the consumers, because destructive price-cuts involve aggressive acts towards decreasing prices, and therefore the whole sector may become un- profitable. Monopolies sometimes suffer huge losses; they do not always operate in a profitable environment.

Some economists believe that the dilemma in the presence of a monopoly is whether “business is a matter of private interest and of private law or a matter of public interest and public law” (Reed, 1916). Liberals believe that the major objective for any business is to promote public interest and increase consumer satisfaction. This view is related to the social contract approach where a corporation “has an obligation to society over and above the expectations of its shareholders” (Ghillyer, 2008). Hence, consumers in this situa- tion would be able to purchase goods and services at a fair price without any discrimination. How- ever, if private interest is of primary significance a corporation’s aim would be to maximize profits and therefore, monopolistic power would not be considered unethical.

In the last half century, industries have de- veloped at a faster rate than business morals. Therefore, “the misapplication resulting from the unequal evolution between business morals and business conditions appear to be the fun- damental cause of our present monopolies and other industrial problems engaging in the serious efforts of legislatures and courts” (Reed, 1916). The application of ethical standards to the busi- ness conduct hasn’t been present in many sectors, especially in Lebanon.

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CONCLUSION

Abolishing monopolies corresponds to the global trend to liberalize markets, this in response would lead to free-trade, and a reduction in prices and taxes. On the other hand, many believe that if monopolies are eliminated many disadvantages would be present and new ethical problems would arise. Competition does not necessarily reduce price and may lead to poor quality, due to the large number of products being offered in the market (Chedid, 2002). In addition, “ending exclusive dealerships would lead owners to close down their establishments and in return, increase unemploy- ment” (Chedid, 2002). Therefore, there is no right decision as whether to abolish monopolies and introduce competition or to keep them operating and benefiting from their presence.

An independent regulatory body is going to be needed, whether privatization is going to take place in Lebanon or if monopolies are going remain functioning. In addition, there should be a clear policy, where companies should abide by different rules set by the law. The government can also intervene by setting a ceiling price in which businesses cannot go beyond. In Lebanon, unfortunately, politicians are too busy with matters that do not usually deal with public interest and therefore, applying new rules and formulating a regulatory body would be too hard to achieve. Even if a regulatory body is to be formed, it cannot be independent of political objectives. Therefore, the only solution for solving the telecommunication sector dilemma in Lebanon is for a third opera- tor to enter the market, which would definitely decrease costs and force all companies to operate efficiently in order to survive.

REFERENCES

Adams, W. S. (1953, November). Competi- tion, monopoly and countervailing power. The Quarterly Journal of Economics, 67(4), 469. doi:10.2307/1883596

Boulding, K. E. (1945). In defense of monopoly. The Quarterly Journal of Economics, 59(4), 524–542. doi:10.2307/1883294

Chandrasekaran, R. (1998, November). Microsoft attacks credibility of intel exec. Washington Post.

Chedid, F.S. (2002, February). Anti-monopoly move instigates scorching battle in Lebanon. Lebanon Wire.

De Roover, R. (1951, November). Monopoly theory prior to Adam Smith-A revision. The Quarterly Journal of Economics, 65.

DeMarco, C. (2001, May). Knee deep in technique: The ethics of monopoly and capital. Journal of Business Ethics, 31.

Ghillyer, A. S. (2008). Ethical Theories. In Busi- ness ethics: A real world approach (2nd ed.). Academic Press.

Habib, O. S. (2009, December). Privatization mostly sidelined in ministerial statement: Telecom sector can fetch hefty sum, but debate persists over its sale. Daily Star Newspaper.

Hutt, W. H. (1936, March). Discriminating monop- oly and the consumer. The Economic Journal, 46.

Konrad, A. S. (2000). Foundation. In Proceed- ings of Privatization and the Communication Sector in Lebanon: Workshops and Seminars. Academic Press.

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http://dx.doi.org/10.2307/1883596

http://dx.doi.org/10.2307/1883294

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Lemieux, P. S. (1989). Socialized medicine: The Canadian experience. Academic Press.

Martin, J.S. (2000). Arab telecoms: Monopolies challenged. Middle Eastern & Central Asian Studies, 301.

Meed, J.S. (2004). Blueprint for change: Middle East economic digest. Middle Eastern & Central Asian Studies, 48.

Nash, M.S. (n.d.). Under lock key: No end in sight for state control and protection of Middle East. Academic Press.

Posner, R. A. (1975, August). The social costs of monopoly and regulation. Journal of Political Economy, 83.

Pratt, J. A. (1980, December). The petroleum industry in transition: Antitrust and the decline of monopoly control in oil. The Journal of Economic History, 40.

Reed, H. B. (1916, January). The morals of mo- nopoly and competition. International Journal of Ethics, 26.

Riley, G. S. (2006). As markets and market sys- tems. Eton College.

Shehadi, K. S. (2004). Competition in telecom- munications and the information-based economy: Planet Lebanon 2004. CONNEXUS Consulting.

Tohme, N. S. (2002, October). Hanging on to the cash cow. The Executive Editor, 38-39.

White, A. S. (2009, May 13). Intel fined record $1.44B for monopoly abuse. Fox News.

Wu, C. Z. (2012). A tiger without teeth? Regulation of administrative monopoly under China’s anti- monopoly law. Review of Industrial Organization, 41(1–2), 133–155.

KEY TERMS AND DEFINITIONS

Competition: Rivalry among several players aiming at over performing and resulting in higher quality and wider coverage.

Corporation: A legal form of an expanding business activity reaching a social wide scale.

Market Structure: Degree of intensity of com- petitive forces within a specific business industry.

Monopoly: Productive delivery including only one player.

Oligopoly: Productive delivery orchestrated by a relatively small (3 to 30) number of players.

Pricing: Allocation of a numerical value to an exchange within a market resulting in the as- signment of the various terms and parameters of the exchange.

Privatization: Transfer of government owned public property to private ownership.

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APPENDIX

Learning Objectives

L.O.1: Define monopoly. L.O.2: Determine the source of monopolistic power. L.O.3: Discuss different approaches used by companies to address CSR. L.O.4: Describe how monopolies operate in Lebanon, and give examples of some companies that are

operating as monopolies. L.O.5: List advantages and disadvantages for monopolies. L.O.6: Discuss the telecommunication sector in the Arab world and Lebanon.

Summary

Define Monopoly

Monopoly is the case when a firm provides products or services to which there is neither competition nor a near substitute, dictating price and quantity produced.

Determine the Source of Monopolistic Power

The main reasons that give rise to monopolistic power are:

• Control over the supply of raw material being used, • Marketing strategies, • Patents and copy rights, and • Merger of operations between two major companies.

Discuss Different Approaches Used by Companies to Address CSR

Two approaches are used by companies to address corporate social responsibilities, the instrumental ap- proach, and the social approach. The instrumental approach is when a company performs monopolistic behavior in order to maximize company profits and satisfy corporate shareholders. The social approach is when a company seeks the good of the greater environment, looking beyond the benefit of shareholders.

Describe How Monopolies Operate in Lebanon and Give Examples of Some Companies That Are Operating as Monopolies

In Lebanon monopolies are operating inefficiently and are selling overvalued goods and services to consumers. Major examples are Electricite du Liban, and Middle East Airlines.

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List Advantages and Disadvantages for Monopolies

Monopolistic behavior may provide certain positive advantages like helping expand different industries, generating a lot of capital into the business cycle, introduces innovation, a solution to some major eco- nomic problems.

Disadvantages of monopolies are mal-distribution of the social product, decreased economic growth of nation and increase in its unemployment level, block competitive markets, and lack of efficiency. Moreover, monopolies raise unethical concerns because they involve acts of conspiracy and consumers will be buying products they need at unjust prices

Discuss the Telecommunication Sector in the Arab World and Lebanon

Stat-telecom monopolies are facing difficulties in the Arab World, in order to overcome these problems the Arab state-owned telecoms are required to give up their monopolies by privatizing the industry.

The telecommunication sector in Lebanon is flourishing. But, the immense profits produced by this industry are questioned from an ethical point of view because of the monopoly abuse and high prices for the services; privatization maybe the solution.

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Chapter 6

DOI: 10.4018/978-1-4666-7254-3.ch006

The Ethics of Social Media and Network Security:

Issues in the Workplace

ABSTRACT

A definition of modern social media leads to the characterization of advantages and disadvantages of social media in the workplace. The characteristics of social media are: reach, accessibility, immediacy, and permanence paradox. The extent of media invasion of privacy is discussed in this chapter, and ethical dilemmas are raised. Social networks are regarded as the main reasons for the decrease of productivity and other unanticipated confidential problems, which a company may face. Furthermore, the implications of security alerts lead to a dilemma between individual privacy and common interest. Different types of attacks might interfere with an existing functional network. Relevant current issues in Network Security include: authentication, integrity, confidentiality, non-repudiation, and authorization.

INTRODUCTION

A social media site is a podium that permits user- generated content to emerge through interactions and associations in a virtual community. Security has several implications by which one must watch for. Heterogeneous networking technologies, high- er speed connections, and ubiquitous access lead to theft of confidential information, unauthorized use of network bandwidth/computing resource, spread of false information, and disruption of legitimate service. Data diddling (the changing

of data before or during entry into the computer system), spoofing, network eavesdropping, email related: virus, Trojan, worm.

BACKGROUND

Ever since the onset of the digital age, human reli- ance on computer technology and the Internet has grown and continue to grow exponentially. This growth, however, was constantly and consistently met with numerous security concerns. This is best

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showcased by the fact that the “market for security software has witnessed an unprecedented growth in recent years” (Dey et al., 2012). As the name implies, providing Network Security is the act of monitoring activities being conducted in a certain network, and protecting the data being transmitted through the network from any form of outside or unwanted interference.

Network Security is the series of policies and provisions taken by a network administrator in order to ensure the safekeeping of a network and to prevent any possible unwanted or unauthorized access, alteration of data flowing through the network, and misuse or abuse of the network by individual who have access to it. The most basic form of network security, other than setting secure passwords for each individual using the network, is the firewall. The firewall could either be a software or a hardware-based security system that monitors the incoming and outgoing network traffic, and determines based on analyzing the information passing within the network whether data should be allowed through or not. There are two types of attacks that could compromise the security of a network: either passive attacks or active attacks (Wright & Harmening, 2009). Passive attacks include wiretapping, port scan, and idle scan. Ac- tive attacks are larger in number and most notable include denial-of-service-attack, spoofing, and format string attack (Wright & Harmening, 2009).

STATE OF THE ART

The security software market has witnessed a boom during the past few years. The number of individuals buying Network Security tools is increasing rapidly. In fact, this particular market has grown from 6.4 billion dollars in 2004, to 16.5 billion dollars in 2010 (Gartner, 2011). Accord- ing to Dey et al., there are two main categories of Network Security software. These categories are:

1. Off-the-Shelf Third-Party Standalone Tools: Includes antivirus, antispyware, anti- spam-ware software among other products; and

2. System Components: Such as encryption software and firewalls that are engraved within the operating systems of computers.

There are currently 81 vendors of antivirus soft- ware in North America, and 87 vendors worldwide (Dey et al., 2012). The most prominent companies specializing in Network Security software are Symantec, McAfee, Kaspersky and others.

One type of vulnerabilities that unauthorized individuals could use to hack into a network is the open ports used in wireless networks. The fre- quency of usage of wireless networks is increasing rapidly, as a growing number of public places are using such networks to provide internet services to incoming clients. In fact, there was an estimated 143,700 public access points worldwide as of 2006, and this number was projected to increase to 818,700 throughout 2007 (Chenoweth et al., 2010). These public access points, also known as hotspots, are used in a wide array of establishments such as airports, coffee shops, restaurants, hotels, etc… These establishments are usually located in heavily populated areas, making the threat of network hacking through open ports very real. With more and more users getting accustomed to connecting their wireless devices to these freely available hotspots, the threat of these users picking up malicious codes that compromises their private information increases (Chenoweth et al., 2010). In 2010, Chenoweth et al. investigated the vulner- abilities present in public access points located on a college campus. Their data was collected during a period of 41 days. During this period, 3331 unique users accessed the public access points available on campus. The results of the study revealed that 8.62% of the 3331 computers that connected to the campus hotspots had an open

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port, and that 65% of the time, these open ports posed a significant security threat (Chenoweth et al., 2010). Results also revealed that approximately 9% of the users did not have any form of firewalls on their computers, rendering them particularly vulnerable to attacks, and that in fact, seventeen computers had been compromised by some sort of malware. Another network soft spot is what is known as peer-to-peer sharing (or P2P sharing). Internet users use P2P sharing software in order to send images, videos, songs, and other files back and forth to one another. Like public access points (hotspots), P2P networks are growing at a fast rate. In fact, “the file movement on these networks represents a significant percentage of internet traffic” (Johnson et al., 2009). The dangers of P2P are grave in nature. Users may unwittingly compromise very sensitive information that could be used against them in the future by hackers and other criminals. The way P2P works is that users share a folder containing files with other individu- als. Usually these files include songs, pictures, and videos, but may also include private files that contain valuable information pertaining to the users. Through vulnerabilities in the software, these files may become accessible to unwarranted hackers who can then use them for malicious in- tents (Johnson et al., 2009). More often than not, users unwittingly upload sensitive information on the P2P network. According to Johnson et al., this occurs for several reasons, most notably:

1. Misplaced File: The file containing private information is placed in the uploaded folder by mistake;

2. Confusing Interface Design: Users may not realize what files are being uploaded; and

3. General Laziness on the Part of the Users: Users may not take the needed time to prop- erly organize their files before uploading a document.

To prove the dangers of P2P sharing networks, Johnson et al. searched the Gnutella P2P network for sensitive information and they came up with startling results. They were able to obtain no less than 45 Birth Certificates, 42 Passports, 208 Tax Returns, and 114 Free Applications of Federal Student Aid (FAFSA). These results portray the dangers of using P2P sharing networks and urge the users of such networks to be particularly care- ful when sharing files online.

Fengmin Gong (1999) presented his article “Addressing Network Security”. Gong explains the two concepts of Security and Security attack, were he defines the second as any action that threatens the state of security’s well-being. He then adds that security has several implications by which one must watch for. First a heteroge- neous networking technologies which adds to its complexity, a higher-speed communication puts more info at risk in a given time period, and ubiquitous access increases risk exposure. From that comes a consequence of attacks from which Gong mentions: theft of confidential information, unauthorized use of network bandwidth/comput- ing resource, spread of false information, and disruption of legitimate services. Later, he adds about security mechanism that helps detect and prevent such attacks.

Later, Ariana Eunjung Cha (2005), a Wash- ington Post Staff Write, discussed in her article (Viruses, Security Issues Undermine Internet) how internet is undermined by looking at its benefits and forgetting about how dangerous it can get once attacked by users having no “goodwill”. As an example, in the Internet Store Center, more than 1000 sites became unreachable including Google. As a conclusion, experts think that the network has to be redesigned in order to overcome the bugs that were introduced in its first design.

Daniel Millions (2007) wrote an article titled “Defining Computer Security and Privacy Is- sues”, where he mentions that “it is crucial for

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businesses to keep information they have secure so that hackers can’t access the information, just like home users also need to take means to make sure that their credit card numbers are secure when they are participating in online transac- tions”. He defines “computer security risk” as “any action that could cause lost of information, software, data, processing incompatibilities, or cause damage to computer hardware, a lot of these are planned to do damage”. Daniel differentiates between different kinds of attackers: cybercrime, hacker, cyber-terrorist, script kiddle, and finally, a corporate spy.

Brendan Collins (2008) wrote an article titled, “Privacy and security Issues in Social Network- ing”, where he mentions that “given the rising popularity of social networks, it’s little surprise that there have been several high-profile breaches of security on sites as huge as MySpace and Facebook”. He describes in his article how sites are vulnerable for security breaches and access to personal data. Sites with great number of users suffer more from security breaches than sites that are hardly visited. Recently Facebook has been a victim to a type of security breach through the use of the third party API exposed to developers. With the existence of massive developers, the probability of such issue is less possible to be controlled but can be made complex by having a well designed and secured framework. On the other hand, Facebook users are ought to share information that is not completely private and be more careful about sharing passwords. On the same topic, Radell Hunter (2010) wrote an article (Common Network Security Problems), where the Hunter’s point out that Network Security issues is not only about viruses and malwares it is also not about malicious intent to attack data circulating on the network. Security problems can be initiated by employee’s lack experience and misuse of the system, and then comes the deliberate illegal ob- tainment of information through hackers’ attacks

or its destruction. As for the common problem, the software attacks for example viruses that aim at bringing down a network and sometimes caus- ing irreparable damages. Network security issue do not have to originate from human, a network is prone to natural forces such as lightning and floods. It is important to consider all these risks in order to protect the network.

Recently Daniel Brecht (2011) wrote an ar- ticle concerning Social Engineering and its rise, which also was edited by Bill Hunter, in August 30. According to the writer, “Attackers can be from outside organizations, but they can also be insiders — disgruntled or greedy employees or contractors. When attackers are able to physically access a system, they can wreak a world of havoc.” He mentions that network attacks continues to rise due to lack in security and network awareness training, for if a user fail to physically protect their system it will leave it open to variety of attackers to hack the PC or network. Daniel introduces the topic of social engineering of which one of the most common kinds is physical access attack. It involves the interaction with computer users to have them reveal security-relevant information to cause breaches in a network system or even impersonate the person. For this, a biometric device would be a good investment in owning, since passwords are known to be easily hacked.

The topic of Network Security was discussed by several writers and experts. SandMartin, an Out- sourcing Experts, emphasizes on the importance of network security in breaching the confidentiality of customers’ data, in an article “Data/Network Se- curity”. For the experts, the implemented security plan is at 3 levels: Physical, Network Security, and confidentiality. The first and last deal with having monitored environment ranging from deploying CCTVs and excessive security guards to signing Non-Disclosure Agreements. As to the measure- ments related to security, they start with having unique authentications to employees, forbidding

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The Ethics of Social Media and Network Security

the use of electronic devices on the productions floors, continuous monitoring of data traffic, anti- virus plans and ending with daily data backups in order to prevent data corruption and loss.

In 2012, a famous attack was known to be as the Man in the Browser (MitB), were it’s primar- ily used to modify financial transactions in online banking. Another issue discussed was the “The Inside Man”, which basically mentions the trust which organizations got towards their employees, were it should protect itself and its clients from by limiting access to sensitive information. Finally, the article talks about Wireless Network Security, which mentions that attacks have increased signifi- cantly even for encrypted networks. Another article in businessresearchguide.com addresses Weak Passwords, where attackers have to compromise the right account through brute force or dictionary attacks and they will have access to sensitive data. Another issue addressed is the Smartphones and Tablets, pointing out that nowadays Smartphones and tablets must be considered just like a computer for a mobile malware is designed to compromise a network simply upon the connection of the phone or tablet, thus, needing an anti-virus, else it will be used as a Trojan horse. Finally, it mentions that Foreign Powers has a significant increase with cyber attacks which are originating in antagonistic industrializing nations. It has become the most common origin for “Advanced Persistent Threat” attacks, which employ persistence and multiple attack vectors as the primary weapon.

Concerning Computer Networking, an article is written on Business Link which mentions that network is becoming more used in businesses as they combine several servers or computers all to- gether, where multiple computers can access their data from a centralized server. The advantages are apparent by enabling a transparent way to access user profiles from any machine and transmit data from any computer to the other. However, this

introduces the security issues, where a malware on a machine can circulate on the network to bring the whole system down. In order to prevent such incidents, it is favored to only authenticate one user with full rights on the network where restricted access to other users will diminish the possibilities of having security attacks.

Security is becoming more important as people are spending more time connected. The different types of attacks which might interfere with one’s network are:

1. Data diddling (the changing of data before or during entry into the computer system);

2. Spoofing; 3. Network eavesdropping; 4. Session tokens; 5. Email related (e.g. virus); and 6. Trojan (e.g. worm).

Network Security implies:

1. Authentication: The process of determining whether someone or something is, in fact, who or what it is declared to be, integrity, confidentiality (data cannot be modified undetectably);

2. Non-Repudiation, and 3. Authorization: What you are allowed to do.

Network Security issues are becoming a main concern for companies especially after the increase of using of network to facilitate data sharing between employees. As soon as data transition has started between machines, the network has become a point of attraction for hackers to retrieve and corrupt this information. In order to secure data, companies attempt to keep up with latest technologies and implement more developed net- work solutions. However, this is done at risk too therefore the need of experts in the field to make

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The Ethics of Social Media and Network Security

sure that the transition is smooth and happens with least damage. It is unsafe to believe that our network is completely secured since there might be someone ahead taking advantage of vulnerable aspects of the network to attack.

SOCIAL MEDIA IN THE WORKPLACE

According to ACAS (2011), social media has 4 characteristics: the reach, accessibility, im- mediacy and permanence paradox which need to be understood when considering its impact upon organizations. Social media has the ability to reach a vast number of people instantaneously and quickly. It is cheap and unlike traditional media production – it does not require specialized skills from users. In addition, social media can be adapted or enhanced through user comments, editing or content submission.

“There is an ongoing debate between employers and employees over the widespread use of social networking sites. The question is that whether social media networks should be banned in the workplace or not” (Silva, 2007). Besides that, discussions on the advantages and disadvantages of using social networks in the workplace are also under fire (Burton, 2007).

To Ban or Not to Ban?

The decision to ban or not to ban social network in the workplace should be taken with much con- sideration. Employers should find appropriate and flexible ways to capitalize the increased use of social networking sites rather than just focus on its negative impacts and ignore the benefits it might bring to the company” (Schiller). Moreover, Schiller states that, “employers should state clear the company’s policy on social networking. Not only that, employers should ensure that employees fully understand the policy’s purposes as well as the punishments for breaking the rules.

Use of social media and tools such as IM and Web conferencing encourage team building and enhance communication and collaboration skills. Blogs, YouTube, Google Documents, and online communities support in research, hone creative thinking, and can actually increase employee productivity and efficiency (Awolusi, 2012).

Adrian Ott(2010) argues “there are many benefits to social media that companies cannot ignore such as customer relationships, collaboration and mar- ket research. For business-to-business providers, employees and executives are the customer making social media interaction a necessity”.

“Workers who communicate easily, accurately and quickly have the best chance at being produc- tive and effective. As those who grew up using instant messaging and other online contact systems advance in the business world” said Under. In con- trast, “most employers believe that the increased use of social networking websites of employees while at work reduce their productivity and harm for the organization’s reputation as well as lead to other unexpected confidential problems” (Silva, 2007; Himmelspach, 2008; Moore, 2011).

Moore provides statistical information that 79% of employees admit to using social media at work for “business reasons” and 82% of employ- ees admit to using such media during work time for “personal reasons”. Having the same idea as Moore,(2011); Murugesan, (2008) stated that “the main reason for the diversion of social networks was because of the huge desire of employees to socialize and engage with others. Meanwhile, for most employers, productivity of employees is their most important concern. Arguing that employees should use their time at the office to serve the company’s best interests and that employees are not paid to check and update status profiles, a lot of companies have tried to block access of employees to Facebook, Twitter and other social networking sites” (Moore).“Using social networking sites may divert employees’ attention away from more

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The Ethics of Social Media and Network Security

pressing priorities, so it’s understandable that some companies limit access,” (Willmer, 2010). “For some professions, however, these sites can be leveraged as effective business tools, which may be why about one in five companies allows their use for work-related purposes.” The study conducted by Robert Half Technology revealed that “54% of U.S. companies say they banned workers from using social networking sites like Twitter, Facebook, LinkedIn and MySpace, while on the job. It also found that 19% of companies allow social networking use only for business purposes, while 16% allow limited personal use”.

Many organizations believe that social net- working sites have the ability to support branding and promoting the organization in the market (Burton; Murugesan). Many employees perform unethically at their workplace and might cause numerous risks to the organization with their use says Mintz (2011) “Accessing social media, like Facebook, for personal use while at work. Using a company computer, personal digital assistant or Smartphone to access social media, with risks of excessive bandwidth use, equipment ‘wear and tear’ or breakage, or access to improper social media (such as ‘adult’ or ‘hate’ sites)” (Mintz, 2011). Other unethical behaviors performed by employees are when they post or discuss others or display certain social media at work that can lead to claims of harassment, use one’s company email address or a username that refers to one’s employment with the company, use without per- mission the company name, logo, trademarks, copyrighted information or discussion boards or other social networking sites that can infringe on the company’s rights to and control over these as- sets and maintain a blog that accepts advertising from his or her company’s competition or post a false review about a competitor’s product or service (Mintz, 2011).

“It is obvious that social media is being used unethically at the workplace” says Brooks. “Much

is said about the benefits of social media for busi- nesses, but what about the drawbacks? Though we’ve long heard about the productivity drain among employees who use social media at work, a new downside is getting some attention: ethical violations” (Belicove, 2012). According to the Ethics Resource Center study, the use of social media appears to be contributing to the problem of violation of law in which the research revealed that45% of U.S. employees observed a violation of the law or ethics at workplace. “Socially adept employees may be more likely to slack off and engage in traditionally unethical behavior simply because of job dissatisfaction, as seven in 10 em- ployees reported having plans to switch jobs in the next five years. That was compared to four in 10 of their non-active social networking colleagues” (Belicove, 2012).

FUTURE TRENDS

Vulnerabilities that threaten the integrity of Network Security are very real and dangerous. The consequences of gaining access to sensitive information by malicious parties could prove cata- strophic. Therefore, it is important to figure out ways to ensure that Network Security threats are kept to a minimum. One way to minimize threat is to join a managed service security provider (MSSP). MSSP’s are “a form of collaboration where several firms share resources such as diag- nostics, prevention tools, and policies to provide security for their computer networks” (Gupta & Zdhanov, 2012). The advantages of joining these networks include the pooling of risk facing each enterprise which in turn reduces the overall threat of a cyber-attack, as well as the benefitting from more security-enabling resources and professional expertise (Gupta & Zdhanov, 2012). Another way to avoid leakage of sensitive information online is encrypting such information. In fact, Castle (2013)

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The Ethics of Social Media and Network Security

states that encrypting data “makes it completely unreadable to anyone but you or its intended re- cipient. Best of all, much of the software used in offices and on personal computers already comes with encryption functionality built in”. The author goes on to list the items that could be encrypted. These include the entire hard drive, the internet traffic, the email, and even word documents, PowerPoint presentations and Excel spreadsheets (Castle, 2013).

“As mobile malware and virus are rapidly in- creasing in frequency and sophistication, mobile social media has recently become a very popular attack vector” (Wu, 2013). Disparate discussions in literature on security aspect of mobile social media through blog mining provide some key insights can help enterprises understand security risks associated with mobile social media. Risks related to mobile social media are identified to help enterprises mitigate risks of mobile social media, and to mitigate the security risks of mobile social media.

Moreover, the NET generation will be inter- ested in advanced security and privacy issues such as phishing, hacking, firewalls, and sexting among teenagers, and online predators and other Web related cases. Since this is such a large topic that it actually can be expanded and divided into several upcoming areas of interest. Other topics that can be further expanded include: white collar crimes; money laundry; pansy scheme ; online reputation; prism; industrial espionage; mass surveillance; government secrecy; wiki leaks and snowmen; food safety; building code and building safety; public transportation safety; who; genetically modified food; and cloning. Some of the above topics and other issues are currently in the domain of science ethics or engineering ethics, but as soon as services or products are commercialized, they become business ethics issues.

CONCLUSION

Mintz (2011) claims that

…companies should establish clear policies and procedures with respect to the use of social me- dia including: clarifying the distinction between use of social media for company versus personal use; monitoring and auditing of employee use; assessing proper company use of social media; compliance with laws and regulations; and edu- cating employee regarding proper and improper use of social media.

REFERENCES

ACAS. (2011, September). Social media and its impact on employers and trade unions. ACAS.

AT&T. (2011, November 11). Social networking in the workplace increases efficiency. AT&T.

Awolusi, A. N. (2012). The impacts of social networking sites on workplace productivity. Academic Press.

Belicove, A. N. (2012, January 13). How social networking breaks down ethics in the workplace. Business Insider.

Brecht, D. (2011). Understanding social engi- neering and password network attacks. Academic Press.

Brooks, J.S. (2012, January 10). Social media con- tributes to ethical lapses at work. Business News.

Burton, J.S. (2007, November 7). Bringing social media to work. ZDNet.

Castle, A. S. (2013, January 18). How to encrypt (almost) anything. PC World, 31(4), 29–30.

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Chang, H. Y., Narayan, R., Wu, S. F., Vetter, B. M., Wang, X., Brown, M., et al. (1999). Deciduous: Decentralized source identification for network- based intrusions. In Proceedings of Integrated Network Management (pp. 701-714). IEEE.

Chenoweth, T. S., Minch, R. S., & Tabor, S. (2010). Wireless insecurity: Examining user security behavior on public networks. Com- munications of the ACM, 53(2), 134–138. doi:10.1145/1646353.1646388

Collins, B. (2008). Privacy and security issues in social networking. Academic Press.

Cooney, M. (2011). 20 hot IT security issues. Academic Press.

Dey, D. S., Lahiri, A. S., & Zhang, G. S. (2012). Hacker behavior, network effects, and the secu- rity software market. Journal of Management Information Systems, 29(2), 77–108. doi:10.2753/ MIS0742-1222290204

Eunjung Cha, A. (2005). Viruses, security is- sues undermine internet computer networking. Academic Press.

Gartner. (2006, September). Gartner says security software revenue totaled $7.4 billion in 2005 (Press release). Stamford, CT: Gartner.

Gupta, A. S., & Zhdanov, D. S. (2012). Growth and sustainability of managed security services networks: An economic perspective. Management Information Systems Quarterly, 36(4), 1109–1130.

Harned, S. S. (2009). Ethics recourse center survey. Ethics Resource Center.

Himmelspach, J. S. (2008). Facebook finds its way into the workplace. Grand Rapids Business Journal, 1(December), 5.

Johnson, M. E., McGuire, D. S., & Willey, N. D. (2009). Why file sharing networks are dangerous? Communications of the ACM, 52(2), 134–138. doi:10.1145/1461928.1461962

Kumar, A. S. (2011). Computer network security problems and solutions: Quick fix tips. Academic Press.

Mintz, J. S., Branch, C. S., March, C. S., & Lerman, S. S. (2010, June). How easy is it to introduce something new? Issues associated with introducing a new technology tool (the HANDS mobile solution) to develop social skills with children with autism. In Proceedings of World Conference on Educational Multimedia, Hyper- media and Telecommunications (pp. 1799-1808). Academic Press.

Mintz, S. (2011, May 8). Social media ethics in the workplace. Workplace Ethics Advice.

Moore, J.S. (2011, October). Social networking in the workplace. National Law Review.

Murugesan, S. S. (2008, March 11). To ban or not to ban. Cutter Consortium.

Ott, A. J. S. (2010, November). How social media has changed the workplace. Fast Company.

Redspin Security Team. (2011, January 7). Top security risks. Author.

Schiller, K. S. (2009, November). Employers crack down on social networking. Information Today, 21.

Silva, C. S. (2007, November). Productivity con- cerns pull HR into debate over social web sites. Employee Benefit News, 32.

Smith, J.S. (2010, April). The Facebook global monitor. Inside Facebook.

Under, J.S. (2012, February 17). Social media in the workplace. Investopedia.

Willmer, S. S. (2010). CIOs forecast increase in second-quarter IT hiring. Robert Half Technology.

Wright, J.S., & Harmening, J.S. (2009). Security management systems. Managing Information Security, 47.

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http://dx.doi.org/10.1145/1646353.1646388

http://dx.doi.org/10.2753/MIS0742-1222290204

http://dx.doi.org/10.1145/1461928.1461962

The Ethics of Social Media and Network Security

Wu, H. (2013). A survey of security risks of mobile social media through blog mining and an exten- sive literature search. Information Management & Computer Security, 21(5), 381–400.

KEY TERMS AND DEFINITIONS

Confidentiality: Protected space of informa- tion based on privacy and preselected span of the information.

Data: Large amounts of measurements pre- sented consistently in a raw pattern.

Information: Translation of data into useful knowledge.

Multimedia: Technology driven means of communication through social networks.

Network: Inter related connections between individuals and groups all related to a source.

Privacy: Privilege of containing information and attitudes within an individualized space.

Security: Protection system against criminal activity and unexpected adverse events, usually related to human misconduct.

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The Ethics of Social Media and Network Security

APPENDIX

Learning Objectives

L.O.1: Define network security and social media. L.O.2: Discuss the advantages and disadvantages of social media in the workplace. L.O.3: Define security attack and list different kinds of attackers. L.O.4: Discuss the implications of security that one must watch for. L.O.5: Define computer security risk. L.O.6: Understand different types of attacks which might interfere with one’s network. L.O.7: Discuss different issues in Network Security.

Summary

Define Network Security

Network security is the authorization of access to data in a network, which is controlled by the network administrator.

Define Social Media

A social media site is a platform that allows user-generated content to emerge through interactions and collaborations in a virtual community. It is a broad term given to describe the latest evolution of internet and web based communication platforms which enable users to rapidly connect and interact in a variety of different formats.

Discuss the Advantages and Disadvantages of Social Media in the Workplace

• Disadvantages: Time wasters, drain employee productivity, harm organizations reputation, prob- lems in confidentiality, distracts employees

• Advantages: Enhance collaboration, communication, and teambuilding, increase creativity, aid in research; enhance customer relationships, increase employee knowledge and access to information.

Social networks find their way into the corporate world; employers are struggling with the decision whether to ban or not to ban the use of these websites. Hence, social networks are considered as the main causes for the decrease of productivity and other unexpected confidential problems which a company might face with. However, it is also necessary for people to acknowledge the positive aspects of social networks and the benefits.

Define Security Attack and List Different Kinds of Attackers

Security attack is any action that threatens the state of security’s well-being. There are different kinds of attackers: Cybercrime, hacker, cyber terrorist, script and finally a corporate spy.

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The Ethics of Social Media and Network Security

Discuss the Implications of Security That One Must Watch For

Security has several implications by which one must watch for. Heterogeneous networking technologies, higher speed connections, and ubiquitous access lead to theft of confidential information, unauthorized use of network bandwidth/computing resource, spread of false information, and disruption of legitimate service.

Define Computer Security Risk

Computer security risk is any action that could cause loss of information, software, data, processing incompatibilities, or cause damage to computer hardware, a lot of these are planned to do damage.

Understand Different Types of Attacks Which Might Interfere with One’s Network

1. Data Diddling: The changing of data before or during entry into the computer system, 2. Spoofing: Situation in which one person or program successfully masquerades as another by fal-

sifying data and thereby gaining an illegitimate advantage, 3. Network Eavesdropping: Network sniffing is a network layer attack consisting of capturing

packets from the network transmitted by others’ computers and reading the data content in search of sensitive information like passwords, session tokens, or any kind of confidential information,

4. Email Related: Virus, trojan, worm.

Discuss Different Issues in Network Security

1. Authentication: The process of determining whether someone or something is, in fact, who or what it is declared to be,

2. Integrity: The assurance that information can only be accessed or modified by those authorized to do so,

3. Confidentiality: Data cannot be modified undetectably, 4. Non-Repudiation: Ensure that a transferred message has been sent and received by the parties

claiming to have sent and received the message, and 5. Authorization: What you are allowed to do.

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Chapter 7

DOI: 10.4018/978-1-4666-7254-3.ch007

Environmental Pollution

ABSTRACT

Environmental ethics is the part of ethics that inspects questions of moral right and wrong relating to the management, defense, or endangerment of the natural resources available to us. Environmental ethics falls under the universal ethics theory. It does not seem fair to people from the future that we are consuming the world’s resources now and leaving just a little to them, and that we’re leaving the world polluted and in a situation worse than it once was. This can be explained through three different perspectives: the utilitarian perspective, the deontological perspective, and our duties to others based on our rights. This chapter explores environmental ethics.

INTRODUCTION

Pollution is the introduction of the impurities into a natural environment that causes uncertainty, harm, or distress to the ecosystem i.e. physical systems or living organisms. The major forms of pollution are visual pollution, air pollution, noise pollution, soil contamination, radioactive contamination, thermal pollution, light pollution, and littering. Noise pollution is extreme displeasing human, animal, or machine-created environmental noise that disturbs the activity or balance of human or animal life, it can cause problems in both health and behavior. Soil contamination is caused by the existence of human-made chemicals or other modification in the natural soil environment. At adequate dosages a big number of soil impurities

can cause many chronic illnesses and even death. A common assumption in business is that busi- nesses only have duties towards people and that nonhuman units aren’t worth moral deliberation, but nature can have intrinsic value; this is called “naturalistic ethic”. The main causes behind industrial pollution are: unregistered small scale units, lack of pollution control systems, and lack of awareness. Various solutions are suggested solutions to decrease industrial pollution:

1. Country wide studies need to be done throughout the country;

2. Institutional policies and legislations need to be developed; and

3. Greenpeace and NGOs are needed and should be heard.

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Environmental Pollution

BACKGROUND

For the most part, environmental pollution is the byproduct of human activity, industrial or other. Pollution can take on many forms, and these forms are categorized into two main group: Chemical Substances, and Energy. Examples of chemical substance pollution include air pollution, soil contamination, water pollution etc… In contrast, energy pollution encompasses light pollution (over-illumination which could sometimes be harmful to nearby eco-systems), noise pollution (caused by operating heavy machinery such as planes), visual pollution (the over-abundance of materials and objects that influence the integ- rity of the landscape, such as billboards, scarred landforms, power lines etc…). Pollutants are the actual waste materials that cause pollution and the degree of perniciousness of the pollutants depends on their chemical composition, concentration, as well as their persistence. Some examples of pol- lutants include pesticides, noxious gases such as sulfur dioxide and chlorofluorocarbons, as well as heavy metals that cause soil contamination. Pollution, although harmful to the environment and to the living creatures that inhabit it, is a nec- essary consequence of economic growth. In 2012 Ahmed et al. tested the relationship between envi- ronmental pollution and economic growth of the Maldives using the Environmental Kuznets Curve and the Ordinary Least Squares (OLS) method. The analysis of the empirical data retrieved from the study revealed “a strong positive relationship between environmental pollution and economic growth” (Ahmed et al, 2012).

Businesses don’t deliberately set out to damage the environment. Yet, some factors create an ill- fated situation, which in many cases is poorer than it needs to be like disregarding natural resources that are held in common and seem abundant. Businesses are driven by the motive of making a profit. Businesses believe that they do not have a responsibility to protect the environment out of

what the law necessitates, and that environmental responsibility rests with consumers. Environ- mental responsibility of a business can be shown by three different theories. The anthropocentric theory that says all environmental responsibility is derived from human interest alone. The animal rights view states that higher animals qualify as morally significant creatures. The eco-centrism theory states that we have direct responsibilities to environmental collections as we have direct responsibilities to humans.

Consequentialist ethical theories stem from utilitarianism. It regards the intrinsic “good or bad”, “value or disvalue”, as more important than the “right or wrong”. Right or wrong is determined as whether the consequences of a certain action are good or bad. Environmental ethics, calls for weighing out the consequences of each decision to be made by the direct effects it will have on the environment; the environment being not only that of the natural area but also of all living things in the surroundings.

DEFINITION OF POLLUTION

Pollution is the introduction of the impurities into a natural environment that causes uncertainty, harm, or distress to the ecosystem i.e. physical systems or living organisms. Pollution can take the form of chemical substances or energy, such as noise, heat or light. Pollutants, the components of pol- lution, can be either foreign substances/energies or naturally occurring contaminants. Pollution is often classified as point source or nonpoint source pollution.

Environmental pollution poses a serious threat to the environment as well to human beings in that it “affects the quality, or aesthetics, of human life, and displays potential to undermine conditions necessary for the sustainability of human life” (Youngblood Coleman, 2013). Different countries and regions are affected by pollution to varying

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Environmental Pollution

extents, depending on the level of their industrial activities, size of their population, and the state of their infrastructures (Youngblood Coleman, 2013). In 2013, Denise Youngblood Coleman presented an overview of the current environmen- tal conditions of different regions and countries around the world. Youngblood Coleman’s inves- tigations revealed that the North-American region (chiefly, Canada and the United States) is the biggest contributor of pollution in the world. The author affirms that the United States of America, due to its great motor vehicle usage and industrial activities is the number emitter of greenhouse gases, especially carbon dioxide. Other factors of environmental degradation in the United States of America include the large-scale deforestation (especially in the north-west coastline), as well as agricultural pollution “including nitrate contami- nation of well-water nutrient runoff to waterways, and pesticide exposure-is significant in various areas” (Youngblood Coleman, 2013). This has caused the extinction of a number of endangered species which has caused the decline of fish stocks. Another major contributor to worldwide pollution is Europe. In fact, the author states that Europe contributes 36 percent of the world’s Chloro- fluorocarbon (CFC) emissions. The continent is also responsible for 30 percent of carbon dioxide emissions as well as 25 percent of sulfur dioxide emissions. Environmental pollution (especially in Western Europe) has been the cause of acid rain that has damaged many areas across the continent. Luckily however, European countries have started adopting environmental policies targeted at re- ducing pollution. These policies include cleaner production technologies and alternative methods of waste disposal (Youngblood Coleman, 2013).

As previously mentioned, environmental pol- lution poses a serious threat to human life and survivability. In 2013, the United Arab Emirates’ government commissioned a team of research- ers to investigate the prime causes of diseases in the country. The research’s aim was to reveal to

main factors leading to the onset of disease so that the government can better allocate its funds to combat the root causes of the most prevalent illnesses (Gibson et al., 2013). Health risks of the population have shifted rapidly from infec- tious diseases to “chronic conditions observed in developing countries”. In order to determine the disease burden of the country, six environmental exposure roots were investigated: outdoor air, indoor air, drinking water, coastal water, occupa- tional environment, and climate change. The final results of the assessment revealed that the prime cause of deaths in the UAE was outdoor air pollu- tion with 651 attributable deaths 04 7.3% the total number of deaths at the time of the assessment (Gibson, 2013). Outdoor pollution was followed by indoor pollution with 153 attributable deaths, and occupational exposures with 46 attributable deaths. Moreover, the top contributor of hospital visits was found to be the act of drinking polluted water. The results of this research underline once again the grave consequences of environmental pollution on the lives of human beings, and the urgent need to enact environmental policies that limit the emissions and production of harmful materials.

Similarly to the environmental policies implemented by the European countries, Brazil has enforced environmental regulations on its industrial sector. These strict regulations were imposed during the period spanning from 1999 to 2003, and forced many industrial entities to alter their production processes so that they become less harmful and more environmentally-friendly. De Azevedo and Pereira (2010) investigated how the largest Brazilian oil refinery was responding to the government regulations. These regulations aimed to “minimize local environmental impacts around the refineries, specifically high water consumption and emissions of solid, liquid and gaseous discharges” (de Azevedo & Pereira, 2010). Innovative solutions were found to the newly im- posed regulations. In fact, the refinery invested

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around 22 million dollars in order to address its environmental impacts. The investments were mainly concentrated in areas of waste treatment. Moreover, the refinery adopted two policies of its own in order to comply with government protocols which are: a) Regulation related to local impact: which are techniques used in the production process of the refinery aiming at reducing the environmental impacts of pollutants (reducing water, air, and soil contamination); and b) Regu- lation related to producing less polluting diesel.

TYPES OF POLLUTION

The main types of pollution are listed as follows:

• Air pollution, • Photochemical ozone and smog, • Light pollution, • Littering, • Noise pollution, • Soil contamination, • Radioactive contamination, • Thermal pollution, • Visual pollution, and • Water pollution. (Buchanan and Horwitz,

2001)

THE ETHICS OF ENVIRONMENTAL PROTECTION AND THE COSTS OF POLLUTION CONTROL

Environment cannot be protected by implementing strict standards on firms to minimize the amount of pollution. The costs it takes to help the environ- ment are high. How do we take the decision to pay higher costs to help and protect the environment?

One of the options is a cost-benefit analysis. We can evaluate the damage and benefits done to people by hurting or helping the environment.

Nevertheless, the cost-benefit approach is usually an unreasonable approach and it may be impossible to know how much damage a com- pany’s environmental harm is worth.

In addition to this, the cost-benefit approach is not solely about money. We may have to consider the agony, pain, and death that can be caused by pollution.

Who Should Pay the Costs?

Nobody wants to have to pay all the costs to pro- tect the environment by himself. Most individuals think that those who are responsible for creating a damaged environment ought to pay or those people who benefit from it.

Regulations, Incentives, and Pricing Mechanisms

In some places, a firm has a certain limit on how much pollution it is allowed to produce. The firm may have to set up special techniques that help minimize the amount of pollution, such as a filter. The advantage of this is that the firm which does not comply with this law will be forced to pay a huge fine.

However, disadvantages arise from this as well.

1. Regulators need to know how much pollution to expect from firms and if it is possible for them to decrease pollution. This entails a lot of research and expertise.

2. Regulations usually disregard differences between industries and manufacturers and require them all to be regulated in exactly the same way.

3. Regulation may cause displacement. 4. Firms may be able to reduce pollution below

the regulated requirements, but have no incentive to do so.

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FUTURE TRENDS

Exposure to air pollution results in an estimated 7 million deaths each year. This suggests that air pollution—indoor, outdoor, or both—caused 1 in 8 deaths worldwide in 2012 (Kuehn, 2014). Given the dangers of pollution on the environment and human and animal life alike, important steps and regulations must be taken to prevent or limit its consequences. One possible solution is the institution of property rights. In 2011, Kerekes discussed her assertion that a negative correlation exists between the ownership of property and the level of pollution emanating from that property. The author argues that “when property rights are assured, an incentive is created for property owners to properly care for the surrounding environment and allocate resources efficiently, which leads to economic development” (Kerekes, 2011). Kerekes further argues that the issue of environmental qual- ity should not be regarded as a result of market failure prompting government intervention with the imposition of environmental regulations and policies, but should however be viewed from a property rights perspective. To test this hypoth- esis, the author conducted a cross-country study whose results revealed that “where property rights are well defined and enforced, as with property rights pertaining to land and water, increases in the security of property rights lead to improve- ments in environmental quality”.

Another study found that issuing taxes on harmful pollutants is positively correlated with improving environmental quality. In 2010, Er- bas investigated the effects of assigning a tax on absorbable organic halide (AOH) on market- demand elasticity, input prices, and asymmetries in abatement and production processes. The results showed that the aforementioned factors affect the

“the research and development portfolio of the firms, total paper production and discharges of pollutants, and compositions of dirty and clean firms” (Erbas, 2010). These findings suggest that understanding how certain factors affect the production processes of pollution-producing busi- nesses leads to environmental output.

CONCLUSION

Research claims that middle and junior managers care very much about ethical behavior, but that senior managers mostly only care about profit. Senior managers are the ones who make the deci- sions, but middle managers can slowly shift the climate of opinion in a business.

Well-publicized cases such as Shell and the Brent Spar suggest businesses are more sensitive to public opinion about ethical behavior and have started to act more ethically. Skeptics argue this is not because of a change of heart, but just another changed response to changed market conditions in the stricter standards on companies and limit the amount pursuit of profit.

REFERENCES

Ahmed, A. S., Herve, D. B., & Zhao, L. S. (2012). Empirical study on relationship between environmental pollution and economic growth of maldives using environmental Kuznets curve and OLS method. International Journal of Business and Management, 7(21), 15. doi:10.5539/ijbm. v7n21p15

Al-Azar, M. S. (2002, July 25). Environment code launched after 5-year parliamentary sojourn. The Daily Star.

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Bhattacharya, C. B., & Korschun, D. S. (2011). Leveraging corporate social responsibility: The stakeholder route to business and societal value. Cambridge, UK: Cambridge University Press. doi:10.1017/CBO9780511920684

Captan, L. S. (2001, June 12). Environmental activists are fighting against all the odds. The Daily Star.

de Azevedo, A. M. M., & Pereira, N. M. (2010). Environmental regulation and innovation in high- pollution industries: A case study in a Brazilian refinery. International Journal of Technology Management & Sustainable Development, 9(2), 133–148. doi:10.1386/tmsd.9.2.133_1

Erbas, B. C. (2010). Factors affecting innovation and pollution-reduction performance of environ- mental regulations. Environmental Economics and Policy Studies, 12(4), 139–163. doi:10.1007/ s10018-010-0169-2

Gibson, J. M., Thomsen, J. S., Launay, F. S., Harder, E. S., & DeFelice, N. S. (2013). Deaths and medical visits attributable to environmental pollution in the United Arab Emirates. PLoS ONE, 8(3), e57536. doi:10.1371/journal.pone.0057536 PMID:23469200

Greenpeace Press Release. (1995, May 11). Italian toxic waste still lies dumped in Lebanon. Author.

Kerekes, C. S. (2011). Property rights and envi- ronmental quality: A cross-country study. The Cato Journal, 31(2), 315–338.

Kryter, K. D. S. (1985). The effects of noise on man. Academic Press.

Kuehn, B. M. (2014). WHO: More than 7 million air pollution deaths each year. Journal of the Amer- ican Medical Association, 311(15), 1486–1486. PubMed. doi:10.1001/jama.2014.4031

Masri, R. S. (1995). The human impact on the en- vironment in Lebanon. International Relief Fund.

Michael, D. (2011). Business pollution – Effects. Retrieved from http://www.library.thinkquest.org

US EPA. (1997). Risk assessment guidance for superfund, human health evaluation manual. Washington, DC: Office of Emergency and Re- medial Response, U.S. Environmental Protection Agency.

Youngblood Coleman, D.S. (2013). Global en- vironmental snapshot. Kosovo Country Review, 188-199.

KEY TERMS AND DEFINITIONS

Contamination: Presence of foreign impuri- ties inside a mixed with other elements modifying the basic characteristics of that space.

Ecology: The science of nature which explains the behavior in evolution of life systems in the most natural form.

Environment: The space of linkages between the various chains of eco-biologic life mechanisms.

Health: The state of normal function of a living organism unaffected by disease or dysfunction.

Noise: Background contaminant of a popula- tion or a mechanism.

Pollution: Excessive contamination of a given space leading to the loss of its basic functions and a modification of its individual characteristics.

Toxic Waste: Refused items containing poison resulting from an industrial process with a con- siderable half-life duration therefore representing a threat to basic life.

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http://dx.doi.org/10.1017/CBO9780511920684

http://dx.doi.org/10.1386/tmsd.9.2.133_1

http://dx.doi.org/10.1007/s10018-010-0169-2

http://dx.doi.org/10.1371/journal.pone.0057536

http://www.ncbi.nlm.nih.gov/pubmed/23469200

http://dx.doi.org/10.1001/jama.2014.4031

http://www.library.thinkquest.org

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APPENDIX

Learning Objectives

L.O.1: Define pollution. L.O.2: Understand forms of pollution and their effect on human health. L.O.3: Discuss business attitudes on resisting environmental responsibility. L.O.4: Review philosophical theories of environmental responsibility and implications on business. L.O.5: Understand cost pricing mechanisms of pollution control. L.O.6: Discuss obligations to future generations. L.O.7: Assess the nature value of animal treatment and environmental destruction. L.O.8: Define environmental ethics. L.O.9: Discuss environmental ethics in the light of the Utilitarian theory. L.O.10: Define Industrial pollution and determine how nations are reacting towards it. L.O.11: List the causes behind industrial pollution. L.O.12: Determine solutions to decrease industrial pollution in Lebanon.

Summary

Define Pollution

Pollution is the introduction of the contaminants into a natural environment that causes instability, harm, or discomfort to the ecosystem i.e. physical systems or living organisms.

Understand Forms of Pollution and Their Effect on Human Health

The major forms of pollution are visual pollution, air pollution, noise pollution, soil contamination, radioactive contamination, thermal pollution, light pollution, and littering. Noise pollution is excessive displeasing human, animal, or machine-created environmental noise that disrupts the activity or bal- ance of human or animal life, it can cause problems in both health and behavior. Soil contamination is caused by the presence of human-made chemicals or other alteration in the natural soil environment .At sufficient dosages a large number of soil contaminants can cause many chronic illnesses and even death.

Discuss Business Attitudes on Resisting Environmental Responsibility

Although businesses don’t deliberately set out to damage the environment, several factors create an un- fortunate situation, which in many cases is worse than it needs to be like disregarding natural resources that are held in common and seem abundant. Businesses are driven by the motive of making a profit. Businesses believe that they do not have an obligation to protect the environment above what the law requires, and that environmental responsibility rests with consumers.

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Review Philosophical Theories of Environmental Responsibility and Implications on Business

Environmental responsibility of a business can be shown by three different theories. The anthropocentric theory that says all environmental responsibility is derived from human interest alone. The animal rights view states that higher animals qualify as morally significant creatures. The egocentrism theory states that we have direct responsibilities to environmental collections as we have direct responsibilities to humans.

Understand Cost Pricing Mechanisms of Pollution Control

We can protect the environment by paying a cost for pollution control. The cost is to be paid by those responsible for the pollution, and it should be paid through regulations, incentives, pricing mechanism, and pollution permits.

Discuss Obligations to Future Generations

It seems unfair to people from the future that we are using the world’s resources now and leaving little to them; and that we’re leaving the world polluted and less livable than it once was. This can be explained through three different perspectives: the utilitarian perspective, and the deontological perspective, and our duties to others based on our rights.

Assess the Nature Value of Animal Treatment and Environmental Destruction

A common assumption in business is that businesses only have obligations towards people and that nonhuman entities aren’t worth moral consideration, but nature can have intrinsic value; this is called “naturalistic ethic”.

Define Environmental Ethics

Environmental ethics is the branch of ethics that examines questions of moral right and wrong relating to the management, protection, or endangerment of the natural resources available to us; Environmental ethics falls under the universal ethics theory.

Discuss Environmental Ethics in the Light of the Utilitarian Theory

Consequentialist ethical theories stem from utilitarianism. It regards the intrinsic “good or bad”, “value or disvalue”, as more important than the “right or wrong”. Right or wrong is determined as whether the consequences of a certain action are good or bad. Environmental ethics, calls for weighing out the consequences of each decision to be made by the direct effects it will have on the environment; the en- vironment being not only that of the natural area but also of all living things in the surroundings.

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Define Industrial Pollution and Determine How Nations Are Reacting towards It

Industrial pollution is one that can be directly associated with the industry. Nations have recognized that it is their responsibility to protect themselves and their neighbors from the grave repercussions of industrial pollution by passing laws, holding conferences, signing protocols and attending summits.

List the Causes behind Industrial Pollution

The main causes behind industrial pollution are: unregistered small scale units, lack of pollution control systems, and lack of awareness.

Determine Solutions to Decrease Industrial Pollution in Lebanon

Various solutions are suggested:

• Studies need to be done throughout the country. • Institutional policies and new legislations need to be developed. • Greenpeace and NGOs are needed and should be heard. • Government makes a decision to put environmental as a priority. • Waste management and sewage organization.

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Chapter 8

DOI: 10.4018/978-1-4666-7254-3.ch008

Climate Change: Global Warming Mitigation or Adaptation

ABSTRACT

Growing economies of less advanced countries carry part of the mitigation load of climate change. A logical framework analysis identifies the economic impact for mitigation of climate change in less in- dustrialized economies where climate adaptation seems to offer better prospects of feasibility. Financial instruments are proposed within development of a strategic action plan in mitigation of climate change. An implementable policy matrix is formulated accompanied with a set of performance indicators that are coherent with the action plan. Challenges that are specific to growing economies are identified. Recommendations include lessons learned and limitations of alternative renewable energy sources.

INTRODUCTION

Climate change is threatening the survival of human civilization. The two common strategies to combat climate change is to reduce the emis- sions of greenhouse gases, which is known as mitigation of climate change; and to cope with the impacts of climate change, known as adaptation to climate change. In other words, “mitigation aims to avoid the unmanageable and adaptation aims to manage the unavoidable” (Laukkonen et al., 2009, p.288). Mitigation actions can be achieved in different contexts. These actions can take place at the international, regional, national, local and individual levels (Laukkonen et al., 2009).

BACKGROUND

Definition and Dilemmas of Climate Change Mitigation

The definition of climate change mitigation is provided by the IPCC in its 4th Assessment Report 2007, which states any: “technological change and substitution that reduceresource inputs and emissions per unit of output. Although several social, economic and technological policies would produce an emission reduction, with respect to climate change, mitigation means implementing policies to reduce GHG emissions and enhance sinks” Nationally Appropriate Mitigation Actions

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(NAMAs) for developing countries are included under the post-Kyoto negotiations. Climate change negotiations process has evolved since Rio up to the current negotiations (mainly up to the Co- penhagen Accord). Since its inception, the Kyoto Protocol was designed to be legally binding in emission reduction targets for the Annex I par- ties (DeCanio, 2009) with the option for flexible mechanisms. Non-Annex I parties can voluntarily lower their emissions through the participation in those flexible mechanisms, most notably the Clean Development Mechanism (CDM) which is stipulated in Article 12 of the Protocol. There are 4 main post-Kyoto architectures (Streimikiene and Girdzijauskas, 2009):

1. Targets and timetables; 2. Harmonized domestic policies and measures; 3. Resource transfer from developed countries

to developing countries; and 4. Economic policies in developing countries.

Mitigation is clearly a global public good (Viguier, 2004) since its benefits accrue to all people and not only to a limited set of people. Therefore, it is categorized by being non-rivalry and non-excludability which is the nature of a public good. Mitigation strategies can have co- benefits. This is the case with linking climate change and air pollution. The reduction of CO2 emissions can have favorable impacts in reducing other air pollutants through burning lesser fossil fuels (Barker, 2003). Annex I Parties (Industrial- ized countries) and Non-Annex I Parties (Develop- ing countries) have refined their position towards mitigation since the start of the negotiations up to Copenhagen summit in 2009. Issues being negotiated under mitigation include NAMAs and potential consequences as well as institutional arrangements (Friedrich, 2013). Navigating in- ternational space allows comparison of positions for various interested parties including:

1. Gulf, 2. Levant, 3. Middle income countries, and 4. Industrialized countries.

Climate Change Negotiations

The negotiations should take into account the in- terplay between the international economic system versus the issue of equity and fairness (Sugiyama and Deshun, 2004). Hence, the current negotia- tions are trying to focus on positive co-benefits and spillover effects of mitigation actions from both Annex I and Non-Annex I parties. There is also special attention to the negative consequences of these actions. A development oriented approach to mitigation is a top priority to developing coun- tries. That is why a wider set of actors need to be involved in mitigation (WINKLER, 2008).

Article 3 of the UNFCCC clearly emphasizes the necessity to avert dangerous anthropogenic climate change via the stabilization of greenhouse gases (GHGs). The debate focuses on two themes:

1. The cost-effectiveness of mitigating climate change through the reduction of emissions, and

2. The distribution of mitigation costs among developed and developing countries, i.e. the principle of equity with the right to sustain development (DeCanio, 2009).

The issue of equity is directly related to the principle of “common but differentiated respon- sibilities”, which has been enshrined in Principle 7 of the Rio Declaration on Environment and Development in 1992 as well as in the UNFCCC.

Although the principle of “common but dif- ferentiated responsibilities” have been embodied within the Convention, there are some developed countries that refuse to participate in the Kyoto Protocol unless there is meaningful participation

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from major developing countries or what is known as the emerging economies of the developing countries (Sugiyama & Deshun, 2004). This po- sition is still being advocated in the post-Kyoto negotiations. On the other side, the Non-Annex I parties, especially China and India, and on the basis of this principle argue that developed countries should take on quantified emission reductions first (Sugiyama & Deshun, 2004). This position is due to the right to development and eradication of poverty which is central to all developing countries. Mitigation strategies are effectively implemented when emissions reductions and welfare gains are linked together (Halsnaers, 1996).

The problem of free riding exists within the climate change negotiations. Even though there is a common goal to reduce emissions, parties only put forward limited emission reductions targets (Viguier, 2004). It is important to note that cost-effectiveness is essential for the conclusion of any post-Kyoto treaty (Viguier, 2004). This is clearly evident in the considerations of all major negotiating groups whether they be from Annex I or Non-Annex I parties. Moreover, the issue of cost-effectiveness is also linked to the issue of equity which is clearly stated in the principle of “common but differentiated responsibilities”.

It is apparent that the negotiations are being linked to other agreements and negotiations. This is clearly evident with the linking of climate change negotiations with international trade. This has been illustrated in Viguier, 2004, under the terminology of “leakage effect” which can occur with emission reduction targets. Targets can raise production costs of goods and thus encourage the firms to relocate to developing countries where no emission reduction targets are mandated. Furthermore, the emission reduction targets can induce a reduction in energy demand in developed countries and thus a drop in world energy prices. This drop can in turn stimulate energy demand in developing countries that do not have any obliga- tions to reduce emissions.

Dilemmas and Issues

The main issue at hand is the allocation of emis- sion rights on the basis of equity (DeCanio, 2009). Therefore, it is the political economy of this deci- sion that will have to be dealt with in order to reach a compromise for the post-Kyoto negotiations in addition to the science behind climate change. The UNFCCC is a science-based convention and it is not only about economics. Therefore, there should be a blend between the best available science, the economics, and the political will to bring out an equitable and fair legally binding treaty as an outcome of these negotiations. Mitigation targets should be long term and global. This is clearly stated in Sugiyama and Deshun, which empha- sized that the “nature of the science of climate change is long term and global.” (Sugiyama and Deshun, 2004).

Financial/Economic values driving mitigation process in the Levant as proxy for middle income countries. Basic areas of interest include energy and transport sectors. Emissions are expected to increase in developing countries. Therefore, mitigation is essential in those countries (Hal- snaes, 1996).

Although various proposals have been put forward to mitigate GHGs, “no formula has been worked out for how to distribute across nations the obligations that surely must accompany sig- nificant climate action.” (DeCanio, 2009, p.915) Hence, one of the main contentious issues for

Table 1. Statistics from the International Energy Agency (IEA) reveal the trends carbon dioxide emissions per capita in the Levant.

Country 2007 2008

Egypt 2.24 1.99

Jordan 3.35 3.12

Lebanon 2.77 3.68

Syria 2.70 2.56

Source: IEA 2010.

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the post-Kyoto negotiations remains the issue of mitigation amongst developed and developing countries or as known Annex I and Non-Annex I Parties to the UNFCCC respectively.

It is important to stress on the word “dangerous” since its meaning is decided by society (DeCanio, 2009). Every society perceives “danger” from its point of view and interprets it accordingly. This is clearly visible in the post-Kyoto negotiations. For example, the EU considers the target of global average temperatures should not exceed 2 degrees Celsius as safe. While Non-Annex I parties and most notably the AOSIS consider that the global average temperatures should not exceed 1.5 degrees Celsius (DeCanio). Therefore, the perception of what is safe and what is not is relative among different societies and is related to their national circumstances. The concept of danger is subjective (Tompkins and Amundsen, 2008, p.2). Furthermore, countries act according to their national interests. Hence, altruism is not a feature of international relations (DeCanio, 2009). This is clearly the case when illustrating the dif- ference between the Ozone Layer problem and that of climate change. This entails the “realist” perspective of international relations, in which each nation or region is a rational actor pursuing its own interests“(DeCanio, 2009, p.920).

RESPONSIBILITY AND STALEMATE

The issue of responsibility and the discourse that developed countries should act first to reduce emis- sions is often the main reason of stalemate in the current negotiations (Tompkins and Amundsen, 2008). There are 7 different proposals for commit- ments in the post-Kyoto negotiations. They are the following (Streimikiene and Girdzijauskas, 2009):

1. The continuing Kyoto approach; 2. The multi-stage approach;

3. Contraction and convergence approach; 4. Multi sector convergence; 5. Brazilian proposal; 6. Triptych approach; and 7. Commitment to human development with

low emissions approach.

Developing countries consider that developed countries should take the lead in mitigating climate change through reduction emission targets due to their historical responsibility in emitting GHGs. Developing countries will only commit once the developed countries have demonstrated progress in curbing their GHG emissions (Streimikiene and Girdzijauskas, 2009). On the other hand, some developed countries, notably the US, argue that the Kyoto Protocol does not provide a good basis for continued discussions on the mitigation of climate change since it contains too many flaws (Streimikiene and Girdzijauskas, 2009). These flaws are linked to the leakage effect. The US is inclined towards the least cost option of emission reductions in order not to distort international trade competitiveness. There are economic factors behind the need for emerging developing coun- tries such as China and India to take initiative in curbing emissions as proposed by industrialized countries. The main concern is that a country like China will derive additional advantages regarding international trade if it does not adopt any bind- ing emission reduction targets (Richerzhagen and Scholz, 2008).

Therefore, the debate within the climate change regime has continuously focused on the significance of policies and measures that are directed towards sustainable development as well as commitments that are voluntary in nature (Richerzhagen and Scholz, 2008). Hence, the creation of the notion of NAMAs for developing countries. In Montreal 2005, Parties agreed to launch a two-track process to negotiate further commitments as mandated by Article 3.9 of the

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Protocol. Since major developed countries aren’t parties to the Protocol, then mitigation actions should be discussed under the Convention (Win- kler, 2008). The Bali Action Plan attempted to provide a balance between mitigation actions in both Annex I and Non-Annex I parties (Winkler, 2008). This is clear in Articles 1(b)(i) and 1(b) (ii). These two articles have put the basis for the negotiations that led up to Copenhagen summit. Developed countries should put forward quantified emission reduction targets including those that are no parties to the Kyoto Protocol, notably the US. On the other hand, developing countries have agreed to put forward mitigation actions that are MRV. Furthermore, developed countries should provide technology transfer and financial resources and should be subject to MRV (Winkler, 2008).

LOGFRAME INDICATORS

The LOGFRAME matrix is a tool to develop consistent strategic implementation relating it- eratively in a “one-page “overview overall goals through purpose, activities, and outputs based on predefined indicators as predefined means of verification of executive performance. Implemen- tation is monitored through activities and outputs, whereas strategy impact is evaluated by securing consistency of overall goals with intended behav- ioral changes as a purpose for action.

Horizontal logic of policy implementation relates hierarchy of objectives to performance indicators as means of verification of strategy impact and execution results. Indicators specify precisely how each objective contributes within overall strategy. They set performance targets in order to measure the extent that each objective has been achieved. Finally they provide the basis for monitoring and evaluation. To fulfill their func- tion, successful indicators must be independent, substantial, verifiable, and precise. They serve two categories of performance: process, and quality,

whereas quantity is viewed as target. Elaboration of meaningful indicators is guided by the follow- ing considerations:

1. Relevance to decision making; 2. Transparency and meaning to stakeholders; 3. Feasibility and skill for monitoring; 4. Human oriented coverage (gender, culture,

demographics); 5. Time sensitivity; and 6. Multidimensional sustainability.

FINDINGS ON MITIGATION OF CLIMATE CHANGE

Q1: Mitigation Processes in Growing Economies

Analysis of climate change mitigation under two alternative scenarios offers insight into economic potential of mitigation: a reference or baseline scenario (BS) and a mitigation scenario (MS). On one hand, the BS mirrors the business as a normal state of matters and consequently designates the most likely evolution of the economy. On the other hand, the mitigation scenario integrates new explicit guidelines. In the alternative scenario, the MS, policy analysis and climate change mitiga- tion assessment, is consistent with commitment to the U.N. Framework Convention on Climate Change (UNFCCC). The mitigation scenario typically carries a negative net present value in comparison to the baseline scenario. Henceforth, the analyzed mitigation policy can be expected to pose several challenges.

Q2: Financial Instruments

Key Findings on financial instruments for ad- dressing climate change are based on the enabling capacity of suggested instruments. The following section lists and briefly describes some of these

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mitigation instruments. Which focus on two fi- nancial aspects: economic efficiency and business profitability.

Economic Efficiency

• Link Changeability of the Economic Development with Environmental Ruin: Economic externalities are essential to economic development. Environmental ex- ternalities could be measured through the connection with development.

• Link Possible Advantages of Energy Usage Efficiency to New Energy Causes: Stowage efficacies of wind energy usage denote business and consumer enticements to shift to substitute sources.

• Evaluate Startup Charges of Wind Power-Driven Building Cyphers: Construction costs per unit or per area of done space display economic worth and hook up fittings costs for new and existent buildings.

• Take Part in Local Fund for Wind Energy Equipment: Multi-country regional strategy for wind energy creation can lead to economies of scale and econo- mies of scope.

• Begin organized structure supporting in- tegration of new practices in existing eco- nomic styles.

• Establish financial tools at local, national, and international levels (Farajalla et al., 2010).

Business Profitability

• Create Startup Investment Costs of Wind Farming: Controls of capital in- vestments for joints stations, and initial

costs for individual units permit clear pro- cedures for break even parameters and re- muneration schedules for long term action.

• Deliver Sensitivity Analysis on Scenarios Concerning Cost Benefit Ratios: Opposed situations are related to satisfactory situations to offer sensitivity of financial ratios for a range of markets and reality situations. Back up preparation is probable in order to lessen opposing conditions.

• Evaluate Business Rates of Return and Net Present Values on Micro Wind Construction Divisions: Wind energy con- struction can be completely self-supported.

• Evaluate annuity costs of maintenance of wind energy production as well as costs of operation (Farajalla et al., 2010).

Q3: Policy Matrix

MACRO Aggregation: At Country Level

• Endorse private/ public partnerships at a domestic level.

• Create Positive Cooperation be- tween Environment and Economy: Environmental quality turns into econom- ic worth shown in consumer demand for ecological friendliness.

• Deliver global negotiation agenda for bilat- eral and/or multilateral collaboration.

• Distribute Information for Public Awareness on New Energy Machineries: Relocate information on new wind ener- gy from study to consumer publicity and marketing.

• Integrate the arrangement of data col- lection and storage on wind technology applications.

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MICRO Scoping Incentives and Instruments: At Business Level

• Start a specific research entity in the matter of wind energy production.

• Recognize energy invention funding do- nors by energy source.

• Device a logical agenda for wind energy management.

• Grasp critical talent and expertise. • Provide training for staff; human resources

are the main element of success in the im- plementation process.

Q4: Logical Framework (LOGFRAME) Indicators

Indicators within LOGFRAME framework secure coherent performance with policy matrix.

Finance Indicators

• Adopt market economies for off-grid elec- tronic generators.

• Evaluate third party costs of spill over for pollution control.

• Encourage institutional promotion with fi- nancial incentives.

• Discover privatization choices of the en- ergy sector in Lebanon.

Policy Indicators

• Provide security of the reliability of data on energy ingesting by user category.

• Care for the progress of wind atlas for eo- lian energy creation.

• Promote productions guidelines; match re- gional and international criteria of air qual- ity and environmental safety.

• Improve applications tools (Frajallah et al, 2010).

RECOMMENDATIONS: IMPLEMENTATION CHALLENGES AND OPPORTUNITIES

Policy Implementation

• The policy matrix should be divided into environmental, social, and economic crite- ria (Streimikiene and Girdzijauskas, 2009).

• The policy matrix may look at the individ- ual, organizational, and institutional levels.

• We should look at public attitudes in the policy matrix (Rajan, 2004).

• There is a need to green FDI since only a tiny fraction goes to the environment (Zhang and Maruyama, 2001).

• The barriers related to climate change mitigation projects are related to technolo- gies, management, uncertain rates of re- turn, higher initial investment costs, and small project size and implicit transac- tion costs (Zhang and Maruyama, 2001). Hence, there is a need to reduce these risks such as policy measures and new financial instruments.

• Institutional arrangements are key to en- hance investments in mitigation. Therefore, there is a need for public-private sector linkages (Zhang and Maruyama, 2001).

FUTURE TRENDS

Challenges

• Unique physical landscape features offer unusual transportation concerns, as well as intense differentials in meteorological features.

• Vehicle traffic density produces severe emissions that require immediate monitor- ing and control.

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• Currently operating power generators uti- lize economically and environmentally inefficient as well as outdated fossil fuel technology.

Opportunities

• Develop market for carbon credits. • Restructure organizational governance and

functioning of energy sector. • Synchronize adaptation technologies to

provide better impact of mitigation policy. • Investigate business profitability potential

of alternative wind and/or solar sources.

Some programs, including state programs in Ari- zona, Massachusetts, New York, North Carolina, and a program in the city of San Francisco, will as- sess the potential health impacts of climate change and which local populations are most vulnerable. Other programs, such as those in New York City and the states of Maine, Michigan, Minnesota, and Oregon, will develop strategies for mitigating threats that have already been identified (Kuehn 2010).

CONCLUSION

Growing economies are in a likely vulnerable food security position. Although public policy includes allocation of food subsidies, the prevalent rate of malnutrition is very low, while the food bill is increasing. Concerning future food uncertainties and climate change consequences, the food import bill could be predicted to increase and become more unstable. Adaptation strategies carry a more pertinent likelihood of success than mitigation. Yet mitigation efforts for climate change offer a most needed plan of immediate action.

REFERENCES

Barker, T. S. (2003). Representing global cli- mate change, adaptation and mitigation. Global Environmental Change, 13(1), 1–6. doi:10.1016/ S0959-3780(02)00085-7

DeCanio, S. J. (2009). The political economy of global carbon emissions reductions. Ecological Economics, 68(3), 915–924. doi:10.1016/j.eco- lecon.2008.10.003

Frajallah, et al. (2010). The national economic, environment and development studies (needs) for climate change project. American University of Beirut.

Friedrich, M. J. (2013). Climate change linked with increase in diarrheal disease. Journal of the American Medical Association, 309(19), 1985. doi:10.1001/jama.2013.5879

Halsnæs, K. S. (2002). Market potential for Kyoto mechanisms—Estimation of global market po- tential for co-operative greenhouse gas emission reduction policies. Energy Policy, 30(1), 13–32. doi:10.1016/S0301-4215(01)00056-8

Kuehn, B. S. (2010). CDC targets climate change. Journal of the American Medical Association, 304(20), 2232. doi:10.1001/jama.2010.1684

Laukkonen, J., Blanco, P. K., Lenhart, J., Keiner, M., Cavric, B., & Kinuthia-Njenga, C. S. (2009). Combining climate change adaptation and mitiga- tion measures at the local level. Habitat Interna- tional, 33(3), 287–292.

Powell, R. A., Single, H. M., & Lloyd, K. R. (1996). Focus group research: Enhancing validity of user and provide questionnaires. International Journal of Social Psychology, 42(3), 193–206.

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http://dx.doi.org/10.1016/j.ecolecon.2008.10.003

http://dx.doi.org/10.1001/jama.2013.5879

http://dx.doi.org/10.1016/S0301-4215(01)00056-8

http://dx.doi.org/10.1001/jama.2010.1684

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Race, K. E., Hotch, D. F., & Parker, T. (1994). Reha- bilitation program evaluation: Use of focus groups to empower clients. Evaluation Review, 18(6), 730–740. doi:10.1177/0193841X9401800605

Rajan, S. C. (2004). The role of social change in the US transport sector for climate change mitiga- tion. Energy for Sustainable Development, 8(2), 39–46. doi:10.1016/S0973-0826(08)60458-5

Richerzhagen, C. S., & Scholz, I. S. (2008). China’s capacities for mitigating climate change. World Development, 36(2), 308–324. doi:10.1016/j. worlddev.2007.06.010

Streimikiene, D. S., & Girdjzijauskas, S. S. (2009). Assessment of post-Kyoto climate change mitiga- tion regimes impact on sustainable development. Renewable & Sustainable Energy Reviews, 13(1), 129–141. doi:10.1016/j.rser.2007.07.002

Sugiyama, T. S., & Deshun, L. S. (2004). Must developing countries commit quantified targets? Time flexibility and equity in climate change mitigation. Energy Policy, 32(5), 697–704. doi:10.1016/S0301-4215(02)00336-1

Tompkins, E. L., & Amundsen, H. S. (2008). Perceptions of the effectiveness of the United Na- tions framework convention on climate change in advancing action on climate change. Environmen- tal Science & Policy, 11(1), 1–13. doi:10.1016/j. envsci.2007.06.004

Viguier, L. L. (2004). A proposal to increase developing country participation in international climate policy. Environmental Science & Policy, 7(3), 195–204. doi:10.1016/j.envsci.2004.02.002

Winkler, H. S. (2008). Climate change mitigation negotiations, with an emphasis on options for developing countries. UNDP.

Zhang, Z. S., & Maruyama, A. S. (2001). Towards a private-public synergy in financing climate change mitigation projects. Energy Policy, 29(15), 1363– 1378. doi:10.1016/S0301-4215(01)00038-6

KEY TERMS AND DEFINITIONS

Adaptation: Acceptance of a change due to the incapacity to affect its drivers.

Climate: Dynamic systems of meteorology regulating atmospheric conditions of temperature humidity and wind speed.

Dilemma: A situation of two truths coexisting and competing for an exclusive choice where only one of them will survive.

Global Warming: Generalized increase of temperature levels by a significantly measur- able amount throughout the entire planet due to a green house effect in the upper atmospheric layers resulting from intermittent thinning of the external ozone layer.

Mitigation: Action affecting the drivers of change in an unwanted circumstance aiming at alleviating the consequences of the change.

Negotiation: Bargaining back and forth by sequential steps aiming at reaching a compromise or an agreement between competing parties.

Policy: Deliberate discretionary plan of action preset by a government’s authority with a specific purpose in mind.

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http://dx.doi.org/10.1177/0193841X9401800605

http://dx.doi.org/10.1016/S0973-0826(08)60458-5

http://dx.doi.org/10.1016/j.worlddev.2007.06.010

http://dx.doi.org/10.1016/j.rser.2007.07.002

http://dx.doi.org/10.1016/S0301-4215(02)00336-1

http://dx.doi.org/10.1016/j.envsci.2007.06.004

http://dx.doi.org/10.1016/j.envsci.2004.02.002

http://dx.doi.org/10.1016/S0301-4215(01)00038-6

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APPENDIX: ACRONYMS

CDM: Clean Development Mechanism. FDI: Foreign Direct Investment. GHG: Green House Gas. IEA: International Energy Agency. IPCC: Intergovernmental Panel on Climate Change. KP: Kyoto Protocol. MOE: Ministry of Environment. MRV: Measurable, Reportable, Verifiable. NAMA: Nationally Appropriate Mitigation Actions. UNFCCC: United Nations Framework Conference for Climate Change.

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Chapter 9

DOI: 10.4018/978-1-4666-7254-3.ch009

Tax Evasion

ABSTRACT

Tax evasion is considered by the international laws and domestic laws of most countries as a form of fraud. In most countries, a gap exists between the expected tax revenues and the tax revenues that are actually collected. This gap is naturally due to tax evasion. Understanding why individuals and organi- zations evade taxes is the first step in reducing the aforementioned gap. For a taxation system to be well received and accepted by both the state and the public, it has to be just and fair, clear and precise, and take into consideration the interest of both the state and the citizen. This chapter explores tax evasion.

INTRODUCTION

“Tax Evasion is the general term for efforts by individuals, corporations, and other entities to evade taxes by illegal means. Tax evasion en- tails taxpayers deliberately misrepresenting or concealing the true state of their affairs to the tax authorities to reduce their tax liability, and includes, in particular, dishonest tax reporting such as declaring less income than actually earned; or overstating deductions” (Slemrod, 200). Mertens (1996) the legal definition stating that tax evasion is the “process whereby a person, through com- mission of Fraud, unlawfully pays less tax than the law mandates.”

The law differentiates between two major terminologies that might be a misconception to most people. There is an enormous difference between Tax evasion and Tax avoidance. Tax evasion is fraudulent act of manipulating numbers

and income statements in order not to pay taxes, Tax avoidance, on the other hand, is the lawful use of the tax regime to a person’s own interest, to decrease the amount of tax paid within the law. So Tax Evasion is illegal but tax avoidance is legal. However both tax evasion and avoidance can be viewed as forms of tax non-compliance, as they designate a range of activities that are undesirable to a country’s tax system.

Tax evasion is considered a crime in nearly every industrialized country and makes the guilty party subject to fines or prison time. In most countries, actions that would quantity as criminal tax evasion are looked at as civil issues. Deceitful reporting income in a tax return is not essentially regarded as a crime. Issues like these are dealt with in tax courts instead of normal criminal courts. Nevertheless, some fraudulent tax behavior is considered criminal, for instance, thoughtful distortion of archives. Additionally,

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civil tax indiscretions can also result in punish- ment. It is usually regarded that the degree of eva- sion is contingent to the harshness of punishment for evasion. Generally, the higher the evasion, the higher the level of punishment.

BACKGROUND

It appears that as soon as the taxation process was presented somebody tried to escape it. For a long time England shied away from straight taxa- tion since the thought of revealing income was disliked. The first Income Tax was presented as a temporary tax to assist in providing money for the Napoleonic wars. Tax evasion by appealing too many payments became so predominant that a severe refurbishment of all kinds of deductions was affected.

DEFINITION

Tax evasion is the illegal act of evading the pay- ment of taxes by individuals and organizations. The relevant literature is rampant with articles that examine the effects of certain financial practices on tax evasion, as well as the steps that are being taken by governments across the world in order to combat this phenomenon. In fact, taxes constitute the main source of revenue for any nation, which is why tax evasion is an extremely dangerous practice that can have catastrophic consequences on coun- tries and societies as a whole if left unchecked. That being said, governments around the world are continually updating their tax-related laws to ensure that tax evasion is kept to a minimum, and that taxes are being collected efficiently. One example of this is Jordan’s Income Tax Act No. 28 that was introduced in 2009. . Studying the impact that newly introduced tax amendments have on citizen compliance and tax evasion has identified several characteristics that make up a

good taxation system. Most notably, for a taxa- tion system to be well-received and accepted by both the state and the public, it has to be just and fair, clear and precise, and take into consideration the interest of both the State and the citizen (Al- Naimat, 2013). Ultimately, the study concluded that the new amendments of the Income Tax Act No. 28 increased the commitment of taxpayers to paying their taxes.

One of the main matters that the Internal Revenue Service and the US federal government have to face concerning the IRS tax evasion and harmonizing the federal budget is referred to as the “tax gap”. The US is known to have a tax deficit that it might never collect. Hard work has taken place to try to terminate the gap, however, just a slight percentage, has been collected by the IRS. The gap remains to grow.

The reason behind this inequality is a lack of resources for the Internal Revenue Service. The failure of the Internal Revenue Service to inspect each case lets the tax gap grow and IRS tax eva- sion goes without punishment.

Table 1 shows movements on an explicit study may cross fiscal years. Thus, the data shown in cases started might not at all times represent the same cases shown in other actions within the same fiscal year.

Table 1. Tax criminal investigation data in USA, with case outcomes

FY 2011 FY 2010 FY 2009

Investigations Initiated 153 166 174

Prosecution Recommendations

110 115 83

Indictments/Information 85 83 69

Sentenced 79 62 69

Incarceration Rate* 81.0% 82.3% 78.3%

Avg. Months to Serve 24 19 25

*Incarceration includes confinement to federal prison, halfway house, home detention, or some combination thereof.

Data Source: Criminal Investigation Management Information System, 2012.

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Taxes represent a major source of revenue for the State. However, one study that tackles this issue was conducted in the spring of 2013 by Gamze Oz Yalama and Erda Gumus using survey data collected in Turkey. The study examined the motives that lead to the tax evading behavior and the results revealed that there are many factors that cause individuals to evade paying taxes. In fact, the statistical analysis showed that all 8 tested factors were statistically significant. These factors are:

1. Tax Evasion Factor: Contained three items, such as tax morality.

2. Taxational and Fiscal Factors: Contained eight items, such as tax rate.

3. Economic Factors: Contained six items, such as rational behavior, cost and benefit.

4. Demographic Factors: Contained four items, such as gender.

5. Politic Factors: Contained three items, such as democracy.

6. Administrative Factors: Contained two items, such as tax penalties.

7. Mixed Factors: Contained five items, such as income level.

8. Additional Factors: Contained two items, such as informal economy. (Yalama, Gumus, 2013).

Similarly, another study conducted by Yiqun Wang sought to identify factors contributing to tax evasion using cross-country survey data targeted at firms. The results uncovered that the main factors behind this phenomenon are competition among firms, tax administration and unfair practices, firm size, age, ownership, as well as the quality of the legal environment. (Wang, 2012).

TODAY IN LEBANON

Tax evasion has an effect that cannot be overlooked on both the economy and the treasury. According to the director general of the Finance Ministry,

“There is an immediate and direct cost of this tax evasion. I mean the money you are not getting. This also has a huge cost on the economy which is better known as moral hazard, if the Finance Ministry was unable to collect taxes properly then it would be introducing a bias between companies and tax payers.”

There are no precise numbers concerning tax evasion in Lebanon bout it is thought that the number is relatively high. Like most countries, Lebanon relies on various forms of taxes such as the Value-added Tax, the income tax, and tariffs.

Several economists claim that large companies pay the majority of the total taxes to the govern- ment while the small and medium institutes pay the remaining. Many modifications have taken place over the past few years by the Ministry of Finance to reform the tax department, hire extra staff from the civil sector, and sign some collabo- ration contracts with the European Union, World Bank and International Monetary Fund to assist the government with the alterations.

International Practical Case

On the 12th of October, 2006, Wesley Snipes, who is a well- known American actor and film producer was charged with conspiring to deceive the U.S. government and of purposely assisting the creation of a false and deceitful claim for pay- ment against the U.S.

Lebanese Briefing and Practical Case

In today’s business, the service sector is playing a big role in the world economy and especially in Lebanon. This sector is the basic factor in the Lebanese economy especially the food and beverage segment. According to Paul Aris, the president of restaurant owners’ union, food and beverage sector generates 65% of the annual GDP. However, despite its success and wide-spreading, this sector involves a lot of legal and illegal ma-

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neuvers. The Lebanese ministry of finance does its best to control these fraudulent actions but still, due to its limited capabilities there are many non compliant restaurants. The tax evasion concept is theoretically very easy; it basically involves falsifying the revenue to decrease the VAT and substantially decrease the net income to minimize the income tax. As we know, the revenue formula is Price*Quantity; Price cannot be altered or ma- nipulated to manipulate income statements since it will be too obvious to detect price alterations even by customers, therefore manipulation occurs on the quantity level.

Case Study

What actually happens is that once the invoice is paid by the customer, the electronic data is transferred, and using special software called ORETRIEVE, the company is allowed to reopen this invoice, erase the quantity sold and reprint it. Therefore, at the end of each day, the total sales registered do not really reflect the actual sales. It all starts when the company agrees on a certain percentage of sales to be hidden. For example: if a company chooses to hide 30% of its sales, the total cash will be split into 70-30% and 30% will be stashed in a separate account while the other 70% will be deposited in the company’s account. At this stage the electronic data will be transferred to ORETRIEVE whereby an operator will start erasing items sold from the actual sales in order to match the quantity sold to the new deducted/ manipulated sales. This manipulated data will be presented to the ministry of finance. Therefore, such a process will help the company evade a large portion of income tax and VAT since the stashed 30% will be eventually tax free.

Due to this fraudulent act, the company will not only be stealing from the government but from its customers as well resulting in a double theft from this organization. Since the government

imposes the VAT on the customers through com- panies; therefore companies will collect the full amount of VAT from customers but will submit only the desired amount which is in this case of the restaurant we speak about 70%.Furthermore, those software are widely spread in the Lebanese market and this option will only cost the company 400$ to purchase the software while earning mil- lions in return.

Finally, the restaurant segment in Lebanon represents a real example of fraud activities espe- cially in the tax evasion type of fraudulent actions. Supporting our example, a proof of two different invoices for the same order will be presented in the supporting papers at the end of the project.

Positive Scenario: The Actual Resolution

Nowadays, the ministry of Finance in Lebanon is doing whatever it can to control the tax evasion phenomenon and to tie all loose ends. However, with limited resources and the huge corruption in the ministry by itself, it is nearly impossible to enforce the law everywhere. Nevertheless, in the last few years, it has been witnessed that a huge improvement occurred regarding this matter. An acceptable number of incidences occurred when many fraudulent acts regarding tax evasion were detected and those cases were transferred to the concerned courts. The fact is that Lebanese citizens have lived in such corruption for so many years that it became of their culture, and the ethics in their lives became with no respect, not to mention the ethics in dealing with business matters.

Regarding what is happening today, techni- cally speaking, many auditors are aware of those fraudulent acts in many places and they tend to be associates in the crime.

Therefore, the core of the problem is not in detecting those fraudulent acts but in fact in re- porting them; since many of the mentioned above

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auditors are paid bribery so they do not report the actual status of the companies but associate them to transfer their fake financial statements. In that way, the bribers which are the fraudulent companies will pay the auditors of the ministry of finance an amount of money or some sort of gifts that costs them very little compared to the huge amounts they are saving from paying the real taxes they should pay. This is where things get complicated whereby we can easily jump into many different areas of corruption, bribery, fraud, theft, counterfeit and malpractice of the Lebanese laws and constitutions spread in the Lebanese community in general and government institutions in specific.

Furthermore, there is another aspect that sheds light on the issue is the political coverage that many companies have in the country. As we know, the country is divided into many political and religious sections that can affect judgments of the courts or the actual execution of the court’s decisions regarding tax evasion cases. Therefore, should we find a decent honest auditor who is willing to report the fraudulent incidence and then find a decent judge who is willing to execute and carry on fair judgments, we can’t make sure the execution takes place if companies have the privileges of political coverage.

Normative Scenario: Proposed Resolution

Regarding the discussed problem, no visible and tangible progress can be done without serious thinking of correcting the whole system of fraud detection and prosecution in Lebanon.

To achieve the desired results of decreasing the fraudulent acts of tax evasion, fraud detection methodologies should be very well established and implemented through several steps.

First of all, the government must employ a set of qualified auditors and they should be very well trained on the different fraudulent acts and on the different methods used by tax evaders

not to mention an attractive incentive plan that ensures the loyalty of auditors and to keep them trustworthy and away from bribery temptations; the more the auditor’s well being and wealth is improved by the government, the less he/she could be tempted to be bribed. Moreover, the training that must be given to those auditors must include not only technical issues or tricks that can be used by tax evaders but also they should be trained on the latest software and technologies those evaders might use to make the detection of the fraudulent act easier and more efficient.

Second, the government must make sure that all its ministries and departments interchange information and have ongoing and updated data concerning all suspects. This information must be intercommunicated within all institutions from the ministry of finance, ministry of Justice and the police that can detect, prosecute and make sure of the execution of the punishment occurs.

Moreover, the justice system should handle these cases firmly and must consider the auditors under the same umbrella as the suspects so that in case the auditors collaborate with the criminal acts of tax evaders, they should be penalized with maximum punishments. This will ensure that au- ditors are below the enforcement of Law and will make them think thoroughly before committing such mistakes.

Finally, there is a part of the problem that can be solved by the people themselves when selecting the proper candidates upon elections to assume that the right position is filled by qualified people. This is the only way that we force the politicians to lift up their coverings on some crime committers.

LESSONS LEARNED

At the beginning of this research we were not aware of the difference between Tax evasion and Tax Avoidance, and we were not aware of the magnitude of the problem here in Lebanon.

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In our opinion tax avoidance is an acceptable way of increasing wealth in condition that it does not break the law. For example if a company chooses to do some charity in the intention of minimizing income tax so let it be. This is what Morgan Friedman argued against in his wealth maximization theory that states that social cor- porate responsibility should not be conducted by corporations because it is not their duty and allows the government to lack its responsibilities towards the community while the companies’ own responsibilities are to make profit & maximize it.

Nonetheless, Tax Evasion, as emphasized earlier, is an ultimate crime in most developed countries around the world and whoever engages in it will suffer the consequences, which include either paying a certain fine or spending time in jail.

Looking to the International case that we took as example for our research, we learnt that no one is above the law whoever the criminal is, and we see someone as famous as Wesley Snipes, very successful and much known Hollywood actor, go- ing to prison for committing a tax evasion crime.

This incidence teaches us a lesson that every citizen is equal and no matter whom you are, if you commit any crime, you will be still treated like any suspect and you will be prosecuted for justice. Following up these issues to the end is very important and we see from the table “How to Interpret Criminal Investigation Data in USA” that 81% of the detected cases in the US are prosecuted and punished. Here, in this case the Media plays a role to shed the light on how the government acts in setting examples of famous people and celebrities to prove to the normal citi- zens that no one is above the law. However, when you look in the Lebanese case, you can actually discover that we are far from being a country that fights the fraudulent acts of tax evasion. As we mentioned in a previous section of the research, the problem is of many faces. First of all, the issue of tax evasion is very popular here in Lebanon

since many people and companies practice this type of Fraud and many speculations on whether the government knows about them or not come across people’s minds. Actually, the main reason behind this phenomenon in Lebanon is the ease that the governmental institutions offer to companies to commit this crime.

Although the government knows about the existence of such behaviors and the law states it is a criminal act to commit tax evasion fraudulent activities, but the corruption in the institutions starting with the auditors who are selected most of the time not on their qualifications but based on shares for each politician. Those auditors don’t have the qualifications to work in this field and even if it happens to be that they have them, then it wouldn’t be difficult to them to accept brib- ery to misreport the financial statements of the companies. Moreover, even if it happens that the auditor is professional and he/she can report a fake financial statement then it would be out of luck to find a judge who isn’t affected by politicians’ enforcements of their opinions in the matter or even being affected by possible bribes.

Therefore, due to all these unfavorable facts and possible reasons, there is a slight possibility that cases of tax evasion fraud in Lebanon are followed to the end or that prosecutions will lead to arrests or would let justice take its place. Finally, we think that unless things change and a true reform to the whole system occurs including auditors, technol- ogy, justice system and politicians’ interventions in these issues the case will not alter to the better and the fight against tax evasion fraudulent crimes will not move forward.

FUTURE TRENDS

Several recommendations were introduced concerning future steps to be taken in order to limit the effects of tax evasion. These steps

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include “enhancing the coordination between the income tax department and the tax payers in modern methods and developing an electronic tax system” and “increasing and dissemination the taxation awareness to limit the phenomena of taxes evasion by conducting awareness campaigns through the mass media and different publication methods” (Al-Naimat, 2013). On a similar note, the European Union announced new rules and regulations aiming to fight tax evasion and fraud. On December 6th 2012, the European Commission required from EU member states to introduce new laws that seek to homogenize the different taxa- tion systems within the Union. These laws would prevent individuals and corporations from taking advantage of these differences in the present tax laws in order to evade payment of taxes. More specifically, and with regards to the double taxa- tion law, the Commission advised EU members to “introduce in their bilateral tax treaties a rule which states that no avoidance of double taxation shall be granted in respect of items of income which have not been subject to tax in the other contracting state” (Toscher, 2013).

Detailed empirical evidence from Greece that around elections, misgovernance results in significant increases in wildfires and tax evasion and has important economic implications: these effects have led to the destruction of property or loss of government revenue estimated at 8% of GDP. There are two plausible reasons why misgovernance might intensify around elections:

1. Attention and effort of elected officials is directed to campaigning instead of govern- ing; and

2. The misgovernance may benefit special interests and serve as a pork barrel transfer that is hard to monitor or control (Skouras & Christodoulakis, 2014).

Redistributive politics are likely a dominant cause of electoral misgovernance. In the case of

wildfires political competition tends to increase electoral misgovernance; furthermore, electoral misgovernance helps incumbents get reelected. While misgovernance may manifest differently among countries, analysis suggests that electoral cycles everywhere may be much more multifaceted and harmful than previous literature suggests.

CONCLUSION

Hedge funds activists are shareholders of a cor- poration who invest heavily in a certain firm with the aim of effecting change. Activist investors can be identified when a firm files the Securities and Exchange Commission (SEC) 13D, which is filed when an investor purchases a number of shares amounting to or exceeding 5% of the company’s total shares (Cheng, Huang, Yinghua Li, Stan- field, 2012). Hedge fund activists choose which firms to invest in based on the firm’s financial and managerial situation. The weaker the firm is, the more attractive it becomes for these inves- tors who sweep in and buy a substantial amount of shares. The ultimate results show that hedge fund activism, and the high level of performance monitoring that it entails improves tax efficiency (Cheng, Huang, Yinghua Li, Stanfield, 2012).

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Al-Naimat, S. S. (2013). Theoretical and analyti- cal study of tax law in Jordan according to the. Income tax and sales tax and its relationship with revenues and tax evasion. International Journal of Financial Research, 4(3), 107–126. doi:10.5430/ ijfr.v4n3p107

Cheng, C. S., Huang, H. S., Yinghua, L. S., & Stanfield, J. S. (2012). The effect of hedge fund activism on corporate tax avoidance. Account- ing Review, 87(5), 1493–1526. doi:10.2308/ accr-50195

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Ćosić, E. S. (2013). Crimes within area of indirect taxes. Business Consultant, 5(27), 75–81.

Meder, Z. S., Simonovits, A. S., & Vincze, J. S. (2012). Tax morale and tax evasion: Social preferences and bounded rationality. Economic Analysis and Policy, 42(2), 179–188. doi:10.1016/ S0313-5926(12)50019-6

Mertens, J. Jr. (1996). Mertens law of federal income taxation. Rochester, NY: Clark Board- man Callaghan.

Ross, A. S., & McGee, R. S. (2012). Attitudes towards tax evasion: A demographic study about south African attitudes towards tax evasion. Journal of Economics & Economic Education Research, 13(3), 13–58.

Skouras, S. S., & Christodoulakis, N. S. (2014). Electoral misgovernance cycles: Evidence from wildfires and tax evasion in Greece. Public Choice, 159(3/4), 533–559. doi:10.1007/s11127- 013-0071-0

Slemrod, J. S. (2007). Cheating ourselves: The economics of tax evasion. The Journal of Eco- nomic Perspectives, 21(1), 25–48. doi:10.1257/ jep.21.1.25 PMID:19728420

Toscher, S. S., & Bauserman, D. S. (2013). Surprise--The fraud of your tax preparer may extend the statute of limitations on tax assess- ments. Journal of Tax Practice & Procedure, 15(2), 23–30.

van der Made, B. S. (2012). European union: New EC proposals on tax havens, aggressive tax plan- ning, tax fraud and tax evasion to be presented in q4 2012. International Tax Review, 23(7), 55–55.

van der Made, B. S. (2013). EU: EU’s fight against tax fraud and evasion, aggressive tax planning and relations with non-EU tax havens. International Tax Review, 24(1), 39–39.

Wang, Y. S. (2012). Competition and tax eva- sion: A cross country study. Economic Analysis and Policy, 42(2), 189–208. doi:10.1016/S0313- 5926(12)50020-2

Yalama, G. S., & Gumus, E. s. (2013). Determi- nants of tax evasion behavior: Empirical evidence from survey data. International Business & Man- agement, 6(2), 15–23.

KEY TERMS AND DEFINITIONS

Black Economy: Illegal underground econ- omy resulting from dangerous activities and widespread crime.

Evasion: Avoidance or refusal to make legal payments to government of legitimate tax amounts.

Fiscality: Set of rules by which taxes are calculated.

Fraud: Disguise of theft or any other illegal activity to appear as legal and regular.

Haven: Protected space away from the reach of governments where activities remain beyond monitoring and supervision.

Public Finance: The monitory dynamics of wealth flow between private and public domains and within the formal public space.

Tax: Amount of money owed to the govern- ment at any level by a legal citizen or institution.

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Chapter 10

DOI: 10.4018/978-1-4666-7254-3.ch010

Media Bias

ABSTRACT

A solution towards media bias would be quite hard since it is somehow part of its culture, but an attempt can be made by allowing watchdog NGO organizations to enforce the law when a breach is in evidence. Then any fine charged should be given to the organization. This way the organization is motivated to continue strict and proper monitoring. An ethical dilemma surfaces when it should never have arisen in democratic society. Give the people truthful and fair accounts of events and be regarded as non-patriotic or defend the country with any means or tactics. Journalistic ethics is most sensitive in situations such as these when disagreement is seen as disloyal. This chapter explores media bias.

INTRODUCTION

Media bias describes the bias of selecting events that will be reported and the way they will be covered by journalists in the mass media. There are several different types of media bias which include: bias by omission, bias by selection of sources, bias by story selection, bias by place- ment, bias by labeling, and bias by spin. Bias by omission occurs when the media reports selected information, taking only one side of a story instead of both sides; for instance within a story the media omits the events or facts that are unfavorable for its viewpoint (Babylon). Bias by selection of sources happens when more sources are used to defend a certain view against another view, for example by using the phrase “observers believe”. Bias by story selection is the selection of stories by the media (newspaper, TV channel, radio etc…) that

would suit its standpoint or agenda. For example if a channel was known to be on the conserva- tive’s side it would select the positive stories about the conservatives display them leaving out the positive stories of the liberal’s side. Bias by placement is the degree by which the editor of a story places importance on it, for example if a story is considered important for the editor she/ he is more likely to place the story on the first page of the magazine or at the beginning of the TV news. Bias by labeling occurs when a certain group is placed under a label for example in most western countries Arabs are labeled as terrorists. Bias by spin takes place when a story only has one side but depending on the way the reporter reports it, his/her tone of voice, the viewers will have a certain preference to the story, for instance if the reporter says the story in a sarcastic way the viewer is more inclined not to take it seriously.

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BACKGROUND

The Oxford dictionary defines bias as the “incli- nation or prejudice for or against one person or group, especially in a way considered to be unfair”. That being said, media bias can have catastrophic psychological and economic repercussions due to the wide dissemination of different media outlets and the heavy reliance of the majority of consumers on the information provided by these outlets. Sendhil Mullainathan and Andrei Shleifer sought to dissect the reasons that drive media bias and the consequences that result from this practice. They identified two main reasons for media bias: ideological, and the “need to tell a memorable story”. The first reason behind media bias (i.e. ideology) stems from the editor or the reporter’s desire to influence audience into adopting a certain opinion or belief system. On the other hand, the second reason behind media bias (i.e. spinning the story) has no hidden political agendas and simply exists to liven up or create a story that would be worth telling in the views of the editors or reporters of a certain media outlet (Mullainathan & Shleifer, 2005). However, David P. Baron adds one supplementary cause of media bias to the previously mentioned two and that is reporter greed. In fact, Baron explains in an article published in 2006 that if reporters or journalists gather information through independent investi- gation and believe that skewing, manipulating or misrepresenting this information might aid in their career advancement then these journalists might be inclined to act unethically and bias their find- ings to serve their own personal purposes (Baron, 2006). As an example to this point, Matthew Gentnzkow published an article in 2005 and in it he showcased how three different media outlets reported on the same event (a military battle in Samarra, Iraq during the U.S-led invasion in 2003). The three media outlets included in the article

were Fox News (a conservative American media outlet), the New York Times (a liberal American media outlet), as well as AlJazeera (a prominent Arab media outlet). It comes as no surprise that these ideologically differing media outlets gave very varying accounts of the events of that battle. This example goes to show ideology can affect the accuracy of media coverage and thus create bias.

A myriad of research articles has been pub- lished seeking to define and explain how people perceive and react to biased media. One of these articles is one written by Matthew Gentzkow in 2005. In it Gentzkow remarked that a consumer “who is uncertain about the quality of an informa- tion source will infer that the source is of higher quality when its reports conform to the consumer’s prior expectations”. According to the same article, media bias occurs by “selective omission, choice of words, and varying credibility ascribed to the primary source” (Gentzkow, 2005). Similarly, recent studies have shown that consumers want to read (watch) news that is consistent with their tastes or prior beliefs rather than the truth” (Xi Liang & Savary, 2007). In congruence with this affirmation, Simon Anderson and John McLaren state that media owners and editors of media outlets often have personal political agendas and may choose to manipulate and withhold certain information from the public in order to shape public opinion to their own personal advantage (Anderson & McLaren, 2012). This is particularly dangerous because the same paper uncovered that even rational consumers who have prior knowledge of the editor’s ideology and political agenda may be deceived by this biased coverage of the news due to the fact that the general public does not know how much actual information the media outlet has and thus is oblivious to how much is being withheld (Anderson & McLaren, 2012). Another reason why bias could be particularly harmful is that it is “persistent” in the minds

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of the consumers (Anand et al, 2007). In fact, a study conducted in 2007 by Bharat Anand, Di Tella Rafael, and Galetovic Alexander provided empirical evidence that suggests that media bias “does not seem to disappear even when the media is under scrutiny”.

Since the introductions and fast development of the internet, journalists and reporters, both amateur and professional have found new platforms to spread their stories quickly and to a wide audi- ence. But are news stories found and distributed on the social media to be trusted? A recent article authored by Church Akpan et al. suggests that “most online stories are not objectively reported” (Akpan et al., 2012).

Another study conducted by Chun-Fang Chiang and Brian Knight in 2011 sought to determine the effect of media endorsements on public opinion, especially in newspapers. The empirical results of the study have shown that newspaper endorsements are indeed influential in shaping public opinion and inclining consumers into choosing the endorsed product. However, the extent and amount of this influence is determined by the source of the endorsement. For instance, an endorsing source that has historically been opposed to the endorsed product will be more effective in influencing consumers into adopting the product. As a matter of fact, this study that was conducted to investigate and test the influence of newspaper endorsements on future voting trends revealed that when left-wing newspapers endorse a Republican, or when right-wing newspapers en- dorses a Democrat, the public is more influenced into voting for the endorsed candidate than when left-wing newspaper endorses a Democrat and a right-wing newspaper endorses a Republican (Chung & Knight, 2011).

Information has always been influenced by those who possess it. Since information has been shared within society, there has existed a bias in ‘media’. Even the heralds of the renaissance were

paid to skew the information they cried to the public. Media bias has a long history, but truly begins with the invention of the printing press. With the printing press, information was able to be produced at a very high rate, allowing it to be produced and spread much farther than ever before, and quickly. When it was first created, the print- ing press was very expensive to create, operate and sustain. Because of this, many publishers in possession of a printing press were highly influ- enced by powerful groups in society, as well as politicians and government leaders.

Throughout history, media has progressively become deregulated, especially in western coun- tries. Media has been more and more placed in the hands of private companies, supposedly to separate the spreading of information from the grips of governments, supporting what the American Constitution labels ‘Freedom of the Press’. Although, bias in the media has switched from bias presented by governments to bias cre- ated by powerful social and political groups. Entering into the nineteenth century, the idea of ethics was brought to the forefront of journalism. It was held that journalism should maintain an unbiased position when providing information to the people. Despite this, media bias has become a growing concern throughout history. It has taken on many different shapes and forms, especially now with the use of television news networks and online information sharing. In fact, with the introduction of television and radio, or broadcast, media, propaganda took advantage of the ability to reach large amounts of people in order to spread particular messages in order to gain support, or to deface someone or something.

With the growing power and influence the me- dia was beginning to take hold since the creation of the printing press, governments began to take action in order to protect themselves. In 1798, the United States of American passed the Alien and Sedition Acts, which stated that newspapers

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were prohibited from publishing any articles that directly attacked or questioned the government. Also in the United States, Abraham Lincoln closed many newspapers during the Civil War because he thought they favored the views and struggle of the Southern states.

With the coming of the 20th century, media bias only became more apparent. World War II involved a large war of media between and within countries. Many political figures within the US who supported the United States entering into the war on the side of the Germans claimed that the media was deceiving the American population, and that it was in fact controlled by Jews. Events like this also occurred in England. Adolph Hitler used mass media to spread propaganda throughout Europe and to gain the support of the German population in his quest for world domination. He convinced the German people that the woes of their country were at the fault of the Jews, and that they should be exterminated. As well, he con- vinced the people that what he called the Aryan race was superior in respect to humanity, and that they deserved to hold power over all others. These messages were all carried out through mass media, with the use of newspapers and radios, and propaganda-filled fliers.

With the closing of World War II came the beginning of the Cold War; a global power struggle between Democratic United States and Com- munist Russia. This period also became known as the War of Propaganda. Both sides attempted to spread the message of their respective ideals throughout the world in order to sway power in their favor. This lead to a massive sweep in media bias in the United States. The most notable figure is Joseph McCarthy, who was the head of what was later labeled ‘McCarthy’s Witch Hunt’. McCarthy began a widespread campaign against Communist ideas and support within the US. This led him to utilizing various mediums of media to scare people into fearing Communism and Communist Russia. McCarthy defaced many political figures,

and even Hollywood actors, under accusations of being pro-communist. McCarthy used his media bias to scare Americans into fearing all forms of Communism.

Media bias is extremely apparent in today’s world. As time has passed, the number of news organizations and providers of information has exponentially increased. Today, you can flip through channels on your television and find different reports being offered from different news organizations on the same issue or event. America’s War on Terror has evoked the issue of media bias among many analysts. It is a growing belief that there is no longer a divide between biased and unbiased media. Instead, there seems to be a divide between two different forms of biased media, slanted in different directions and simply holding different views.

Historical Background of Media Bias in Lebanon

Media bias- whether through television channels, newspapers or radio- has always been an issue worldwide; when it comes to Lebanon the case is even more severe since the media bias is not only occurring towards other countries for instance Lebanese TV channels speaking negatively about American matters but the bias even occurs between different political groups within the country. With time media bias in Lebanon is increasing rather than decreasing, this is due to two major issues. The first main cause of the increase in the media bias took place in the year 2007 when opposition political groups placed tents in downtown Beirut in an attempt to overthrow the government. This caused the conflict between the two opposing views, those of the pro-government and those of the anti-government, to become more tense leading to an increase in the differing views of different TV channels. The second cause of the increase in media bias is the war that took place in 2006 between Lebanon and Israel; some chan-

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nels would take a stand with the war while other channels would be against the war. After the war the media focused more on sectarianism instead of the religious and political views it mainly focused on before. When such an incidence takes place each TV channel displays news that is in favor of its owners. “you have to take into consideration the owners and the shareholders; [for each,] you have to respect their own policy.”(Hankir, 2007). Since the owners of most of the Lebanese chan- nels have a political affiliation it is obvious that each channel will be taking the side of its owner (political leader) whether it wants to or not because if it doesn’t its “politician will intervene directly if he feels the content of an article is unfavor- able,” (Alamilnter, 2008) according to an editor of an English local publication who preferred to be unknown because of the subject’s sensitivity.

Different media channels are even becoming more biased after the 2006 war focusing more on sectarianism than on religious and political divi- sions, which is causing the tension between these channels to increase a lot more, it is not only the media’s fault but the people behind the media, the politicians. The politicians can be viewed as the main stimulator of media bias since they are the ones behind the journalists and TV channels; as stated earlier if a politician senses that there is something unfavorable with the article’s content he would directly intervene. Another reason why the politicians are behind the media bias is because they bribe journalists to give in information that is of advantage to the politicians, as stated by Mona Alamilnter, Press Service, “Politicians also bribe leading journalists working in local newspapers, some of whom can be seen boasting luxury watches and handsome cars, though they hardly have the legitimate income to afford such luxuries’ (Alamilnter, 2008). “You’re not asked over the phone if you’re ready to cash a monthly check. You are wined and dined, invited to trips, and offered gifts” (Alamilnter, 2008) so the bribes are formed in the long-run making journalist more inclined to report news to their favorite politicians

since it is not a onetime inducement. What happens in such cases is not that the journalists lie about the information they are reporting or make them up but they do it in a manner called self-censorship.

Self-censorship occurs when a journalist omits certain information (a word, phrase or fact) in order to display information to the politician’s goodwill or even because of the fear from the politicians. “An important event or speech will be covered by one set of media, but not by the opposing channels”(Executive, 2007) as stated by Habib Battah, managing editor of the Beirut-based Middle East Broadcasters Journal. Furthermore, according to Khalifeh “Lebanese MPs tend to pro- mote laws that are in their best interest and not in the public’s” (Alamilnter, 2008) which evidently increases the media bias. Basically the major TV channels in Lebanon have a political interest and rarely any neutrality. Table 1 by Comtrax, a Leba- nese consulting company that audits and tracks Lebanese media, shows the neutrality score of Lebanon’s main TV stations on a neutrality scale of 1 to 10 (10 being the most neutral).

DYNAMICS AND INTRICACIES OF MEDIA BIAS

Media bias is the misrepresentation of facts in order to meet the needs of the media station and its viewers. There are many kinds of bias the me- dia partake in. In the articles we have looked we identified political bias and pressures to support

Table 1. Neutrality scores for some of Lebanon’s TV stations

New TV 3.93

OTV 2.5

Al-Manar 1.49

NBN 2.2

ANB 9.56

LBCI 8.2

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common ideas. American news channels have told their perspective of the events since 9/11 completely differently to the accounts told by international media channels. They have defended their actions at every stage and rarely condemn their own nation. Here is the issue at hand, news channels have a belonging, they represent a kind of people. It seems the real problem with the media is that it is used as mechanism to shape peoples ideologies.

A perfect example of this is the terminology ‘’terrorism’’ which has become the exit strategy for any plan gone wrong. A word that can create a mist on any story and win any debate if brought up is ridiculous. What was once a medium through which the world could be educated and kept up to date on events has become propaganda. Wars are won on television screens and not in real life. For example last year’s attacks on Gaza by Israel were portrayed as a reasonable measure of self-defense by US TV. The problem with the broadcasting is that news has become more of an opinion rather than facts. Touching stories which can make headlines are more important than the communication of the truth. For example when US TV interviewed Israeli spokesmen about the siege their replies were clear misrepresentation of the truth and there were no further questions asked.

Is this ethical? Is this a fair representation of the truth? Are the American people getting the information they need to make an informed opinion of the events? When Israeli spokesmen are telling the nation that ample food and medicine are being supplied to Gaza, are they supposed to believe this? However on Arab TV the reporter’s question the facts given and let the viewer decide on the credibility of the evidence.

Another important point to make is where should the line be drawn between making revenues and carrying out its duties to inform the public of important information. For example the O Riley factor is a political show on Fox News which

discusses current political events. He is a right wing conservative who is completely biased to the war in Iraq and pro American in every con- text. He supported the torture techniques against Guantanamo victims. Again I must raise the question, is this show ethical? What is the objec- tive? Clearly he is not giving any accurate or fair accounts to what is happening. However since he is such a charismatic journalist, people want to watch and be entertained. If people do not have the knowledge or exposure to know better than their ideologies will be shaped by these reports. If News channels are trying to be profitable then surely this is a conflict of interest. Getting great interviews during times of crisis may not be as responsible as concrete evidence and informative accounts. For example during the Gaza conflict the Arab TV journalists were in the middle of the city reporting live action as seen by civilians. However US TV had journalists on the borders of Israel and Palestine, and were not close to any of the action that was occurring. When Israeli spokes- men reported events on Arab TV every account was contested with greatly since they had real footage action and portrayed real life scenarios.

Unfortunately news channels also have a tendency to support political parties. This can influence broadcasting and be biased towards certain parties. This is extremely applicable to Lebanon where every major political party has a channel. Again what is the objective of this channel? Surely this is a conflict of interest, since they are representing themselves, it will be similar to US TV on the war against terror with endless justifications to inhuman actions.

COMPARATIVE EXAMPLE

The case we will be examining is the Media cov- erage after the 9/11 incident. There are two main points we are going to consider. The first will be

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the controversial actions taken by the American government to influence content in media and restrict Freedom of speech. The second will be the media war between Arab TV and US TV during the Afghan conflict and the ethical issues brought up in this situation.

After the 9/11 incident the president’s national security advisor asked Americans to “watch what they say’’ after a comedian had made a controver- sial comment. This was addressed to all Americans including the press. So in fact the government was questioning the ethical behavior of outspoken Americans including journalists and citizens. One of the problems the Administration faced was the Osama Bin Laden video tapes being circulated by the media. It questioned these actions as un- ethical and inappropriate for the situation. When Condoleezza Rice asked, rather than demanded, that bin Laden’s statements be more carefully and tightly edited by American networks, she was aware that it was politically incorrect to demand action; however it was implied.

The reasoning behind the administrations anger was not that it was illegal to broadcast the tapes but how media managers should use that freedom in accordance with what is ethical and professionally responsible. Although this was a strong case for national security purposes, what took place in the next few years became clear misrepresentation of the truth. Although it was not explicitly stated anyone who criticized the government’s actions came under strong fire. One newspaper in Oregon and another in Texas fired staffers who wrote unflattering reviews of the President’s performance since September 11. Washington columnist Mary McGrory, another of the few critical journalists, reported she was receiving more angry mail than she had ever received previously in her long career.

Frank Rich who was writing in the New York Times noted that the administration was using any tactics to sell its own version of events while vigorously contesting any criticism. For example

Dr. Rice’s stated reason for more editing of bin Laden included that he might be sending coded messages to trigger new terrorist incidents. There was no logic behind these statements since these videos were being broadcasted by other media sta- tions in other countries. This case is so significant today because we are able to see how these news channels have changed politics since 9/11. They were faced with a decision to make in 2001, sup- port the government or broadcast the true story.

An ethical dilemma surfaces which should never have no risen in a democratic country. Give the people truthful and fair accounts of events and be regarded as non-patriotic or defend the country with any means or tactics. Journalistic ethics is most sensitive in situations such as these when disagreement is seen as disloyal.

In times of crisis the media must take full responsibility for the ethical decisions they make because it can lead to shaping nations perspectives on truths and lies. The significance of Media is that it is separate from government and the press is essential for democracy because of this fact. In this case we are able to see the consequences of the Americans press decisions to defend its nation. It continued to support the war against ‘’terrorism’’ and created an enemy far greater than they could imagine.

The conclusion is that it may have been right not to pressure the president at such an unstable stage and support the country through the tough times. However these decisions should be made from the media on ethical conditions and not on patriotic means.

The article “A tale of two news corporations” discusses US TVs and Arab TV coverage a year on from the September 11 attacks. In 2002 Arab TV had 30 million viewers compared to 80 mil- lion for US TV. The ethical issue was the two contrasting sides each newspaper took. While both ‘’try’’ to present views from both sides of the Israeli-Palestinian divide in order to be perceived as honest journalist. US TV which is Pro- Israeli

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took events such as the siege of Ramallah and tried to rationalize the actions with Israeli spokesmen while the international community was shocked. US TV is a welcome ground to Israelis Pr tactics which continue to compare Palestinian attacks to September 11 terrorists.

Arab TV also presents the same news, however its “truth” is the opposite account of US TVs truth. Arab TV focuses on the topic of occupa- tion rather than terrorism. They do not support suicide bombing however explain the desperation and repression that lead people to these actions. Although they also lean towards one side the general information is based on live footage and not mere speculation. US TV continue to accuse the Arab freedom fighters as terrorists, and Arab TV are replying by saying that they are missing the point, and that the true ‘reasons’ for these attacks are not being portrayed fairly in the West. This is the ethical issue at hand, truth vs. opinion. US TV have formed a network of opinionated journalist trying to rationalize situations which are so clear to the educated eye as misleading. Unfortunately a lot of its audience cannot make this judgment and are lead to believe in the propaganda.

LOCAL REGIONAL STORY

Media bias in Lebanon has been a hot topic for many years; one case that proves this issue would be the parliamentary elections that took place in June 2009. Each political party made sure that its affiliated television channel dedicated more time to its candidate instead of spending the same amount of time to talk about all the other candidates equally. This is both an issue that is unethical and illegal. First it is unethical because it is not allowing audiences to hear about the other candidates and it is biasing their opinion towards only a certain candidate in the hope of getting people to vote for him since by watching that channel they would know more about him and unconsciously feel some sort connection of connection with him/

her; this is just like advertising, when marketers continuously advertise consumers eventually feel they have a relationship with the product and for example when they go to the supermarket and see that product they will feel like they know the product and unconsciously feel comfortable to go ahead and buy it, it is just like voting for a candidate. What makes it an illegal aspect to spend more time talking about one political candidate over another is one regarding the law. “By law, Lebanon’s media should grant each candidate or party an equal chance to share and explain their agenda,” (Massey, 2009) as stated by Dr. George Sadaka, representative of the Lebanese watchdog organization, Maharat. In addition according to article 68 of the law, media channels have to respect freedom of speech “in a way to ensure equity, balance, and objectivity between all candidates and to abstain from supporting or promoting any candidate or group of candidates in order to remain independent.”(Massey, 2009). Obviously the law is not followed in Lebanon and this can be seen from what happened during the parliamentary elections in June 2009; one TV spent three times more time talking about some candidates while another spent three times more time on opposition parties as opposed to pro-governmental parties.

Lesson Settling the Dilemma

A solution towards media bias in Lebanon would be quite hard since it is somehow part of its culture but an attempt can be made. One step towards improvement was taken during the July 2006 war between Lebanon and Israel, in order to omit or at least reduce the bias in the media and allow citizens the freedom of speech. This attempt was taken by an international grassroots documentary project called Lens on Lebanon. During the war many of the images and information were changed in a man- ner to suit the TV channel’s political affiliation. What Lens on Lebanon did during the war was it gave Lebanese residents in the areas that were affected by the war the chance to report and tell

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their own stories of the war through photographs and videos. The residents were provided with the appropriate equipment such as cameras and video in addition to special training about how to use the equipment. This technique allowed the residence to speak up about their true feelings towards the war instead of leaving it up to the media to report the issues as it wants.

The approach taken by Lens on Lebanon was certainly effective to some degree but it would not last for a long time since it is expensive to provide individuals with equipment and training; in addi- tion many of the Lebanese people lean towards a particular political party which may lead them to report information in favor of their political leader. One more disadvantage in Lebanon as to why this approach might fail is that the residents who are reporting are usually not very financially well-off and this might be an advantage to some political leaders. The consequences that might occur in such cases is that some political leaders may decide to give these residents some sort of compensa- tion (such as money, maybe free electricity, free schooling for their children, monthly salary, free insurance and hospitality if they need it etc…) in order for them to talk in the politicians favor; due to the residents’ financial status, they will be inclined to accept these compensations which will probably enhance their standard of living.

One probable solution to control media bias in Lebanon is to allow organizations such as Maharat to enforce article 68 of the law and if the article was not obeyed the TV channel should be given a fine and that fine should go to the organization and not to the government, this way the organization is motivated to monitor TV channels. In addition for further monitoring motivation the employee within the organization, example Maharat, should be given a commission when he/she detects bias in a TV channel and makes it visible. Here again four problems occur, since in Lebanon nothing is actually followed as it should be. First the TV channel can bride the monitoring organization and its employees with some form of rewards in order

for the organization to keep silent about its bias. The issue here is that the TV channels are willing to pay more than the fine because their reputation is at stake; no matter what the fine is whenever a fine is imposed on a company it will give a negative view of it. The second problem is that the politician who is affiliated with a TV channel will either bribe the employees with rewards or threaten to inflict some form of negativity on the employee in order for him/her to be quiet about the issue. Third the employee is in him/herself with a certain political leader so will evidently not file anything against the politician’s channel. And finally the monitoring organization in itself has an association with a political party.

FUTURE TRENDS

In 2008 author Tom Cooper reported that “an inventory of major studies between 1986 and 2006 indicates the public has continuing and in some cases increasing concerns about specific ethical practices in the mass media industries”. In fact, an increasing number of people are raising concerns over media bias and media deception (Cooper, 2008). Due to the dangers of media bias and its strong potential to influence and manipulate consumers using false or misrepresented informa- tion, researchers have looked into ways aimed at ending this phenomenon. In that light, a few recommendations have been made to try and cut down on media bias. First of all, news organiza- tions can “control bias by restricting the discretion allowed to journalists” (Baron, 2006). Taking into account that one of the causes of media bias is journalists twisting the information to suit their own aspirations of career advancement, one way to regulate bias would be to put more restrictions on reporters and journalists. Another trending solution for media bias is to promote competition between media outlets (Andersen & McLaren, 2012), (Mullainathan &Shleifer, 2005). However the notion of promoting competition between

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media outlets as a way of reducing media bias is not unanimously accepted in the literature. In fact, Anand et al. assert that In general, competition does not lead to a reduction in bias unless this is accompanied by an increase in verifiability or a smaller dispersion of prior beliefs”. Moreover, Mullainathan and Shleifer (2002) remark that “whereas competition can eliminate the effect of ideological bias, it actually exaggerates the incentive to spin stories”.

Evidence suggests that:

1. The media assists in setting the public agenda, by supporting specific events and causes, for better or for worse;

2. The media affects people’s insight on risk, by inexplicably overstating risk and by highlighting possible negative effects over possible positive ones;

3. The media affects elections and their results; 4. The media affects the people’s insight on the

manager, the reputation of the organization, and the products that the organizations offers;

5. The media forms consumer sentimentality and the consumers’ willingness to pay; and

6. The media forms business sentimentality, and affects both the organization level as well as the market level behavior (McCarthy & Dolfsma, 2014).

The media studied are three to six times more likely to associate conceptual labels with firms with a conventional alignment than think tanks having a liberal alignment. This makes the analy- ses conducted by conventional think tanks less objective than the analyses conducted by liberal think tanks. Regression outcomes propose that almost three-fourths of the explained differential in framing rates is a result of media bias. The rest is mainly clarified by the differential in the “qual- ity” of think tanks (Dunham, 2013). Ideological bias in large daily newspapers largely impact public opinion.

CONCLUSION

In conclusion when it comes to Lebanon, a solu- tion to stop media bias is a tough and maybe an even impossible struggle, this is mainly due to the fact that most Lebanese people lean towards a particular political group in some way. For example some Lebanese people might be with a certain political leader simply because they are receiving some type of benefits from him/her such as not paying for electricity, breaking a certain law (for example the politician allowing the citizen to get away with building a building that exceeds the height limits) or maybe the politician has helped them find an occupation; it is basically a win-win situation, the citizens are getting the benefits and the politician is getting their votes in elections.

In a general context one of the main issues is that news channels need to be aware of the huge responsibility and power they yield. There should be more accountability for journalists and news channels reporting misleading information as if it were facts. There seems to be the idea that anyone can have an opinionated idea and tell the news the way they see it. Unfortunately this is not democracy.

Another important point is that links between political affiliations and news channels should be made illegal. Think of the way banks operate in Lebanon, it is illegal for bank managers to meet each other outside work since they could agree on fixing prices. News channels will have a conflict of interest if they have connections with politics. They are no longer telling the reality of the situa- tion, they are forming a biased opinion of a politi- cal party and rationalizing its irrational behavior.

Finally an appreciation of the significance of media bias needs to be comprehended and imple- mented. Part of the reason America have caused so much pain and grief to so many civilians in Iraq and Afghanistan is because of the deception and lies that were told through the media which acted as smoke screens to the real life suffering.

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Even today in Palestine, US TV’s coverage is embarrassing at best and is a disgrace to democ- racy. News channels should be held accountable for misrepresentation of the truth since it is their duty to serve the public by giving them correct information.

REFERENCES

Akpan, C. S., Paul Martin, O. S., Chima Alexan- der, O. S., & Uchenna, A. S. (2012). Rethinking objectivity in news reporting in the digital age. Journal of Alternative Perspectives in the Social Sciences, 4(4), 711–729.

Alamilnter, M. S. (2008). Lebanese media mirrors ‘profoundly divided’. Daily Star.

Anand, B. S., Di Tella, D. S., & Galetovic, G. S. (2007). Information or opinion? Media bias as product differentiation. Journal of Econom- ics & Management Strategy, 16(3), 635–682. doi:10.1111/j.1530-9134.2007.00153.x

Andersen, S. S., & McLaren, J. S. (2012). Media mergers and media bias with rational consumers. Journal of the European Economic Association, 10(4), 831–859. doi:10.1111/j.1542- 4774.2012.01069.x

Baker, B. S. (2005). Types of media bias. Aca- demic Press.

Baron, D. S. (2006). Persistent media bias. Journal of Public Economics, 90(1), 1–36.

Chung-Fang, C. S., & Knight, B. S. (2011). Media bias and influence: Evidence from newspaper endorsements. The Review of Economic Studies, 78(3), 795–820. doi:10.1093/restud/rdq037

Cooper, T. S. (2008). Between the summits: What Americans think about media ethics. Journal of Mass Media Ethics, 23(1), 15–27. doi:10.1080/08900520701753106

Elder, R.S. (n.d.). Ethical issues for the American media in times of national emergency. Academic Press.

Executive. (2002, September). A tale of two news corporations. Executive.

Executive. (2007, December 16). Bias in the air - Lebanon’s political. Executive.

Gentzkow, M. S., & Shapiro, J. S. (2005). Media bias and reputation. National Bureau of Economic Research. doi:10.3386/w11664

Hankir, Z. S. (2007, December 17). Against the Bias. NOW Lebanon.

Massey, N. S. (2009, October 30). Media watchdog slams election coverage. The Daily Star.

McCarthy, K. S., & Dolfsma, W. S. (2014). Neutral media? Evidence of media bias and its economic impact. Review of Social Economy, 72(1), 42–53.

Mullainathan, S. S., & Shleifer, A. S. (2002). Me- dia bias. National Bureau of Economic Research. doi:10.3386/w9295

Sarvary, Y. M. (2007). News consumption and media bias. Marketing Science, 26(5), 611–628.

Selim, A. S. (2007, July 19). Lebanon: Beyond mass media. The Daily Star.

Wayne, R. D. (2013). Framing the right suspects: Measuring media bias. Journal of Media Econom- ics, 26(3), 122–147.

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http://dx.doi.org/10.1111/j.1542-4774.2012.01069.x

http://dx.doi.org/10.1093/restud/rdq037

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http://dx.doi.org/10.3386/w11664

http://dx.doi.org/10.3386/w9295

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KEY TERMS AND DEFINITIONS

Audience: Group of people at the receiving end of the delivered message.

Bias: Personalized preference towards a spe- cific choice caused by prejudice or discrimination.

Communications: Active delivery of a mes- sage.

Journalism: Professional reporting of infor- mation and news in a periodic mode with frequent updates.

Media: Any mechanism by which communi- cations or journalism deliver their information.

Public Opinion: A generalized current percep- tion of a trend or an issue usually resulting from overwhelming events or journalistic activism.

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APPENDIX

Learning Objectives

L.O.1: Define media bias. L.O.2: List the types of media bias. L.O.3: Determine solutions towards media bias in Lebanon.

Summary

Define Media Bias

Media bias is a term used to describe a real or perceived bias of journalists and news producers within the mass media, in the selection of which events will be reported and how they are covered.

List the Types of Media Bias

There are several different types of media bias which include:

• Bias by omission, • Bias by selection of sources, • Bias by story selection, • Bias by placement, • Bias by labeling, and • Bias by spin.

Determine Solutions towards Media Bias in Lebanon

A solution towards media bias in Lebanon would be quite hard since it is somehow part of its culture but an attempt can be made.

• An international grassroots documentary project called Lens on Lebanon gave Lebanese residents in the areas that were affected by the war the chance to report and tell their own stories of the war through photographs and videos during the 2006 war.

• Allow organizations such as Maharat to enforce article 68 of the law and if the article was not obeyed the TV channel should be given a fine and that fine should go to the organization and not to the government, this way the organization is motivated to monitor TV channels. In addition for further monitoring motivation the employee within the organization, example Maharat, should be given a commission when he/she detects bias in a TV channel and makes it visible.

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Section 2

Corporate Business Ethics

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Chapter 11

DOI: 10.4018/978-1-4666-7254-3.ch011

Corporate Social Responsibility

ABSTRACT

The impression that business enterprises have some duties toward society beyond that of making profits for the owners has been around for centuries, and it is still, today, at the core of the business ethics debate. The social responsibility for a business is to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, appealing in open and free com- petition without dishonesty or fraud. In order to effectively communicate CSR, corporations should be transparent, use third-party verification, remember the workers, explain their metrics, and be proactive. The benefits of CSR are corporate reputation and enhanced brand image, earning and maintaining social license to operate, establishing reputation with investors, reducing and managing business risks, competing for access to resources, attracting and keeping employees, maintaining employee morale and productivity, meeting changing stakeholder expectations, and eventually improving the bottom line. This chapter explores corporate social responsibility.

INTRODUCTION

Detractors of CSR believe that management has one responsibility and that is to maximize the profits of its owners or shareholders; managers are oriented towards finance and operations and do not have social skills to make socially oriented decisions. CSR would put business into fields of endeavor that are unrelated to their ‘proper aim’, making the business less competitive globally. Moreover, CSR will give business social power in addition to the power that it already has.

There are several arguments in favor of cor- porate social responsibility. Large corporations create many social problems, thus they should attempt to address and solve them. Companies must look beyond the short-term, and realize that investments in society today will reap the benefits in the future. By engaging in socially responsive activities the corporate world may forestall govern- mental intervention in the form of new legislation and regulation. Businesses should assume social responsibilities because they are among the few private entities that have the resources to do so.

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HOW CORPORATE SOCIAL RESPONSIBILITY IS DEFINED

In search for a universal definition of CSR, the number and variety among the various definitions has led to a significant explanation about CSR defi- nition that will explain the difficulties to define: “Corporate social responsibility means something, but not always the same thing to everybody. To some it conveys the idea of legal responsibility or liability; to others, it means socially responsible behavior in the ethical sense; to still others, the meaning transmitted is that of ‘responsible for’ in a causal mode; many simply equate it with a charitable contribution; some take it to mean socially conscious; many of those who embrace it most fervently see it as a mere synonym for legitimacy in the context of belonging or being proper or valid; a few see a sort of fiduciary duty imposing higher standards of behavior on busi- nessmen than on citizens at large’’ (Votaw, 1972).

There are too special studies done in this field, one by Alexander Dahlsrud (How Corporate So- cial Responsibility is Defined: An Analysis of 37 Definitions), and the second is a research under the name of Corporate Social Responsibility: Lessons Learned. In both studies CSR definitions were gathered through a literature review as a first step, and in the Second step the definitions are categorized into five dimensions and frequency counts are used to explore how consistently these dimensions are invoked.

These five dimensions are: stakeholder, eco- nomic dimension, environmental dimension, social dimension, and governance performance.

• Commitment of business. • Benefits to society/stakeholders. • Ethical behavior. • Environmental performance.

Altogether, 37 definitions of CSR were found and analyzed in those 2 studies. The definitions originated from 27 authors and covered a time span

from 1980 to 2003. The definitions were mainly of European and American source, but meanings from India and Canada were also involved.

But it was very interesting to observe that none of the definitions actually defines the social re- sponsibility of business, as so famously discussed by Milton Friedman (1970) who conjectured that:

…there is one and only one social responsibility for a business, to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.

He concluded that there is no role for CSR, but rather describe CSR as a phenomenon. This might be the cause of the definitional confusion: it is not so much a confusion of how CSR is defined, as it is about what constitutes the social responsibil- ity of business. As a conclusion for this debate I found that there are many available definitions of CSR and they are consistently referring to five dimensions.

Although they apply different phrases, the definitions are predominantly congruent, making the lack of one universally accepted definition less problematic than it might seem at first glance.

The CSR definitions are describing a phenom- enon, but fail to present any guidance on how to manage the challenges within this phenomenon. Therefore, the challenge for us is not so much to defines, as it is to understand how CSR is socially constructed in a specific context and how to take this into account when business strategies are developed.

CORPORATE SOCIAL RESPONSIBILITY: RUNNING A GREEN COMPANY

A company’s sense of responsibility towards the community and environment (both ecological and

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social) in which it operates induces Companies to express this citizenship through their waste and pollution reduction processes, by contributing educational and social programs, and by earning adequate returns on the employed resources.

There are different modes of CSR among them are philanthropy and strategic models.

Business Benefits of CSR

Many articles from the one that I read stress the importance of CSR to be implemented in all corporations, no matter their size is, it could goes from a multinational corporation to small or medium one.

In one research done in Canada where they monitored 10 big companies in different industrial segment and they are already engaged in CSR activities and they assess the outcomes from those activities.

Government Role: Supporting CSR

“Governments have a strong interest in promoting CSR initiatives as a complement to their ongoing environmental and social programs to serve long term national interests” (Mazurkiewicz, 2004). So I found that is very important to highlights the main steps that governments should take in order to meet their goals.

CSR SPECIFIC BACKGROUND: A SPATIAL CONTEXT

Now after portraying the Historical background of CSR, we will examine the Spatial Context whereby the CSR concept came to the forefront of attention and played out majorly in the business arena comparing the perception and implementa- tion of the concept in the world versus Lebanon.

Globally we can identify different approaches to CSR especially between the Continental Europe

and the Anglo-sphere that includes the UK, the United States, Canada, Australia, Ireland, and New Zealand. And even within Europe the debate about CSR is very heterogeneous, whether in different industries or in a same industry.

One approach for CSR that is becoming more commonly accepted is community-based devel- opment approach whereby companies work with local communities to improve themselves; the Shell Foundation’s involvement in the Flower Valley, South Africa is an example: they set up an Early Learning Centre to help educate the com- munity’s children as well as develop new skills for the adults.

A globally important element of CSR is Social Accounting whereby the company is held account- able for its actions. In this context, many reporting guidelines and standards have been developed like the UK Company Law.

In some European countries like France and Denmark, there are legal requirements for social accounting, auditing, and reporting, such as the French Bilan Social the difficulty of establishing, at the international or national level, an agreement on relevant measurements of social and environ- mental performance. In Denmark for instance it is required by law for the 1100 largest Danish companies to report about the policies adopted for CSR and SRI *(Socially responsible Investment).

Sustainable Development and CSR issues are mainly covered in externally audited reports done annually, but even with the same industry these reports defer widely in style, format and the methodology used for evaluation. Yet, reports like Enron’s Yearly Corporate Responsibility Report, and Tobacco Corporations’ social reports are considered by critics as slip service.

In South Africa, the companies that are under JSE (Johannesberg Stock Exchange) are supposed to generate an integrated report in place of an annual financial report and sustainability report that exhibits economic, social and environmental practices in addition to financial performance.

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CSR Background in Lebanon

In the West, CSR has for a long time been a concrete and deep-rooted concept, while such an inherent perspective is far from a reality in the Levant — in the MENA region and specially Lebanon.

Lately the notion of CSR has been gaining significant momentum. Multi-national corpora- tions (MNCs) are seeking to bring in their CSR doctrines from abroad, while local companies and small and medium sized enterprises (SME) are hoping to expand, and many think CSR is the exact tool for them to do that.

National companies tend to feel their partici- pation is too little to make a significant impact, especially when mammoth MNCs throw millions of dollars at civil society. However, it seems the trend is finally gaining momentum in the region, though local corporations face the obstacle of how to learn from successful CSR initiatives (from abroad) without mimicking them.

Lebanon vs. United States

First, we need to know where Lebanon and the USA stand in the world regarding the indexing of being social responsible. In 2008, research shows that USA index is 21 on the other hand Lebanon goes down to 83 from the possible data collected from 181 countries.CSR became the product of the upgrade in profile and responsibilities of companies, and most people are becoming more influenced to invest in organizations that have a significant impact in the wellbeing of the com- munity and the environment.

In United States, where 61% of people own shares, more than a quarter said they had bought or sold shares on the basis of a company’s social performance. Consumers, especially those in North America, are likely to vote with their wallets against companies whose social and environmental performance seems to be poor. Forty-two percent of North American consumers reported having

punished socially irresponsible companies by not buying their products. In Lebanon, by contrast, there is less pressure to follow ethical standards. There, only 8 percent of consumers said they had boycotted companies with low standards of corporate behavior.

In Lebanon, there are no regulations obliging companies to report they social responsibility activities since the structure of the Lebanese pri- vate sector, conquered by small and medium-size enterprises, most of which are family-owned, is yet another difficulty for improving corporate duty.

CSR is mostly practiced in the banking sectors, retail enterprises and international organizations. But most of these companies see the social activi- ties as promotional investments. It has become a way to advertise for their company showing their good intentions to the community in order to influence them.

CSR LEBANON CASE: BANKING

In June 30, 2010, The Bank grants Ministry of Environment a Hybrid car for all formal events .This type of hybrid vehicle, the Toyota Prius, is in fact the first model hybrid car ever created in the world and the first to enter Lebanon.

• In August 12th, 2009, The Bank employ- ees and heads gathered at a public beach site in Rmeileh, south of Beirut to clean up the country’s shores.

• In 2009, The Bank is launching a school/ student competition under the theme “Reducing The Environmental Impact Of The School” to increase awareness among students and create a new environmental responsibility among the Lebanese Youth.

• Financing projects aimed at the rational- ization of energy consumption and increas- ing its efficiency.

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INTERNATIONAL CASE: MNC

MNC, an Irish-owned mobile telecommunica- tion provides mobile services in 26 countries and territories throughout the Caribbean and Central America with more than six million wireless users. Corporate social responsibility is very important to MNC. MNC set up the first of its foundations in Jamaica in 2004 - they have been energetically tangled in charitable work all over the Caribbean funding projects in the area of education, sports and culture, environment and special needs to aid individuals and communities and work to build maintainable, telling programs for the good of Jamaica and Jamaicans. Run completely by MNC staff, MNC capitalized over $1billion and finished over 206 projects to date, affecting the lives of their two million Jamaicans. In 2008 and 2009, MNC also established Foundations in two of its other markets - Haiti and Papua New Guinea. In Haiti the MNC Foundation built 20 primary schools in its first year. MNC aims for accomplishing 100 percent literacy by 2015 by assimilating technol- ogy into classrooms and improving the learning setting and knowledge of children with disabili- ties; allowing communities to flourish through sustainable skills-based projects, nurturing youth development and building cultural consciousness and pride, while protecting their environment.

MNC knows the best people to drive their corporate responsibility programs are MNC staff members themselves. The latter wants communi- ties to not only benefit from the financial support of their CSR programs but also from the skills, team work and dedication of their extraordinary staff in order for the projects to be truly sustainable.

ACTUAL RESOLUTION

These days, there are all kinds of pressure on corporations to “go green”, pay to their communi-

ties and get involved in a whole range of doings that would once have been frowned upon, this is from one hand, but from the other hand the CSR concept is gaining popularity in today’s times.

Companies are becoming increasingly aware of their responsibilities towards the various stake- holders associated with them. More and more companies are trying to work in a way so that to protect the interests of the employees, customers, suppliers and other parties and the society at large.

Even quite recently, the dominant view was that companies existed to make profits for share- holders, not to do good actions, but this concept of a business firm working only with the motive of earning profit is gradually becoming outdated. The results of our small research showed that there are a big gap between the CSR awareness and application inside Lebanon and outside it, and there is full absence of the government role or guidance in it. A strategic CSR is gradually increasing over the other types of CSR outside Lebanon, specially over Philanthropy which still increase in terms of dollar amount (based on a study done in U.S.A), and sometimes they are being used together, like our example about MNC and the unexpected success of that strategy had revealed in Haiti after the earth quick.

In Lebanon what we found was a little bit contradictory with the findings outside it. Com- panies still emphasis the Philanthropy CSR over the Strategic one. However, in the last 5 years a small number of corporations began to apply the strategic CSR and the “Go Green” concept; among them Industrial development companies with their friendly environmental product, and their friendly production process and its impact on its surroundings. Moreover, recently, auto manufac- turers launched its “Go Green” concept with its new marketing campaign with the slogan “Don’t Littre and Drive” with the purpose of spreading awareness on dropping rubbish in public places especially on the roads.

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PROPOSED RESOLUTION

The big question will be why corporations should incorporate environmental concerns into their own strategies? Possible answers are stated as follows:

• Key stakeholders such as consumers, em- ployees and investors are increasingly like- ly to take actions to reward good corporate citizens and punish bad ones.

• Corporate reputation and enhanced brand image.

• Earn and maintain social license to operate. • Establish or improve reputation with inves-

tors, bond agencies, and banks. • Reduce and manage business risks. • Employee morale and productivity. • Attract and maintain employees. • Access to markets/customers. • Corporate values; “the right thing to do”. • Meet changing stakeholder expectations. • Cost savings/improve the bottom line. • Provide valuable input to strategic plan-

ning, as well as a better understanding of sustainability issues facing the company.

• Stimulate innovation and generate ideas.

All these mentioned benefits will be blown by the wind if corporations do not communicate their CSR activities to their stakeholders, but communication is a very delicate substance and any bad or misusage of it will have a negative impact on the corporations. Several indicators must corporations take them into consideration in their communication strategy, in order to minimize stakeholder skepticism:

1. Don’t stretch the truth. 2. Be transparent. 3. Use third-party verification. 4. Remember the workers. 5. Explain your metrics. 6. Be proactive.

With all these advantages listed above; strategic CSR is no longer a luxury but a requirement and a business necessity.

LESSONS

Milton Friedman’s point of view argues that there is one and only one corporate social responsibility of business—to use its resources and get involved in activities designed to increase its profits so long as it remains within the rules of the game, which is to say, engage in open and free competi- tion without deception or fraud. However, there is another approach of CSR which is valid and important as much as Friedman’s.

The first lesson is that strategic CSR is an important tool that can be adopted by companies whom does not seek the short term profit and consider it as cost center. Those companies should select the right issue where their activities would have more impact in the solution and commit to it. Moreover, corporations must not consider CSR as a “marketing tool” just to increase their profit in the short run.

In the second lesson is the discovery of the importance of governmental role in strategic CSR. The Lebanese government should increase its role in spreading awareness about the benefits of CSR, encouraging companies that adopt such activities by reducing their tax fees or providing them with some incentives and joining their ef- forts to achieve common goals.

FUTURE TRENDS

Increasingly, there is a growing perception among enterprises that sustainable success cannot be achieved solely through maximizing short-term profits .Corporate social responsibility’s grow- ing importance on business success and positive impact on society is accepted by the enterprises.

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Perception of corporate social responsibility by Junior Chamber International (JCI), an interna- tional non-governmental organization operating in 115 countries, differ in respect to demographic factors, especially such as sex, age and regional factors which are analyzed through frequency analysis, correlation analysis, t test and variance analysis (Öykü Iyigün, 2013). “Corporate orga- nizations which consider their public relations as corporate social responsibility during their operations, earn more reputation among the con- sumers” (Mudassar, 2010). There is growing need for understanding of communication and image management within the role of the diversity of the board of directors within a CSR and governance systems through transformational leadership at the CEO level, which helps in the implementation of a socially responsible business. This leads to improved corporate financial performance, which then increases the adoption of corporate social re- sponsibility (Alshareef, 2012). Stakeholder theory and transformational leadership theories help to identify a future research agenda within this area. A number of research propositions and research agenda are presented on the potential adoption of CSR literature, and the association it may have with the corporate financial performance.

CONCLUSION

Why Do Governments Depend on the Private Sector to Achieve Public Goals?

The private sector has all the required tools for such achievement starting from money availability, re- sources, skilled employees and better management. So what to do to avoid the damages and promote the benefits of Corporate Social Responsibility? Organizations in first world countries are com- ing to realize the main benefits of incorporating Corporate Social Responsibility into their business

strategies. And we believe it will not take too long until Lebanese organizations come to the same conclusion. Moreover, the board of directors and CEO commitment to the matter is essential for the CSR integration to be successful.

Some will think that it is ok to abandon CSR plans during economic downturns; however, such organizations will be risking losing ground as soon as the economy gets better. And that’s why CSR should be considered as a must even during the hard times. In the future, there should be a shift in traditional thinking in a way that CSR no longer becomes managed as a separate deliverable, but is part of the experience of being an employee in an organization that lives its mission and vision.

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KEY TERMS AND DEFINITIONS

Advocacy: Position, from which an opinion is formulated, heralded and displayed in support of a sensitive issue.

Charity: An institution providing help and support to a needy sector of society that has re- mained outside the economic cycle.

Competition: A mode of rivalry promoting basic values and aiming at exceeding each other’s performance.

Corporate Social Responsibility (CSR): Acceptance of ethical validity across all levels of an economy and particularly a counting for third party effects and business externalities.

Government: Formal authority institutions in a society performing protection and security func- tions and usually guaranteeing equitable welfare.

Public Concern: Issues affecting an entire society usually settled within the public space.

Strategy: Long-term plan of action imple- mented after a careful deliberate consideration of intended goals and available resources.

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Learning Objectives

L.O.1: List the dimension upon which corporate social responsibility is defined. L.O.2: Discuss the arguments against CSR. L.O.3: Discuss arguments for CSR. L.O.4: Describe an effective way of CSR communication.

Summary

List the Dimension upon Which Corporate Social Responsibility is Defined

Corporate social responsibility is defined over five dimensions which are: stakeholder, economic dimen- sion, environmental dimension, social dimension and governance performance.

Discuss the Arguments against CSR

Discuss Arguments for CSR

There are several arguments in favor of corporate social responsibility:

• Large corporations create many social problems, thus they should attempt to address and solve them.

• Companies must look beyond the short-term, and realize that investments in society today will reap the benefits in the future.

• By engaging in socially responsive activities the corporate world may forestall governmental in- tervention in the form of new legislation and regulation.

• Businesses should assume social responsibilities because they are among the few private entities that.

Describe an Effective Way of CSR Communication

In order to effectively communicate CSR corporations should not stretch the truth, be transparent, use third-party verification, remember the workers, explain their metrics, and be proactive.

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Chapter 12

DOI: 10.4018/978-1-4666-7254-3.ch012

Nepotism in a Family Business

ABSTRACT

Nepotism in both its bad and good scopes is not mainly a result of national socio-cultural variances, nor is it the outcome of a global dispersion of morals and standards across nations. Rather it is a culturally driven business practice. Nepotism occurs when traditional forms of interaction are replaced by modern forms without a corresponding modern substitution for traditional social morals. For the successful use of nepotism, family members must meet certain qualifications such as an appropriate educational background and outside work experience. Outside work experience is the most important. In addition, corporations who hire family members should inform them that they will be fired in the case of unethi- cal or illegal behavior no matter how closely related to them they are. This chapter explores nepotism.

INTRODUCTION

Nepotism is the act of hiring relatives in the same company over other candidates. If a corporation employs or promotes a family member, many undesirable consequences may rise. Other employ- ees may feel frustrated about this. In some cases, unqualified heir takes over and drives the firm towards bankruptcy. Reading all about nepotism, listening to different point of views, finding out the advantages and disadvantages, still doesn’t cover one important question: is nepotism ethical? Based on different theories understandings, if we are to consider Utility theory, then we will need to find out the outcome of the act whether taking a decision under nepotism will be productive and effective to the company, if so then it is an ethical act. On the other hand, if we are to look into duty

obligation theory, then the act itself is not correct no matter what kind of outcome we will have. So these are different theories depending on personal perceptions which theory to choose.

BACKGROUND

Nepotism is the act of hiring relatives, which will result in emotional complications in decision making. Nepotism is mostly common in family business in which it will be acceptable, more often, respectful positions for several reasons; could be better for safety/security especially and for confidentiality. However, others oppose this idea that consequences of nepotism might result in illegal employment discrimination. Still others support nepotism in small businesses and/or family

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businesses based on being practiced in a reason- able way having guidelines and qualifications as well as enjoying fair reward system. This means, if a relative or family member will be hired for specific job, he/she should have the qualifications and job related skills at the same time he/she will be treated the same way like others & rewarded likewise. Usually nepotism occurs in business and politics.

Adams Bellow’s Explanation of Nepotism

One of the experts in Family Business Enterprise Adam Bellow through his book “In Praise of Nepotism” explained the differences in Nepotism between past and present as follows. New nepotism is different than old nepotism. Parents are not the ones who pull the strings. Instead, children do it themselves.

Old style nepotism has changed since World War II. Before that time, “…in most family busi- nesses, you kept things in the family. But it wasn’t just an upper class phenomenon. The same thing was done among immigrants. Family members would come over from other countries at different points, and they didn’t come as individuals but as families and ethnic groups. They habitually relied on extended families to get credit and for manpower and markets. All the ethnic groups created their own independent economies, and when businesses became successful they broke out of their ethnic economy. And that’s how most nationally successful businesses started, as a family business. But we forget all of this. People can’t remember when they weren’t in the middle class. They can’t remember how they got here”. (Adam Bellow, 2003)

With this explanation of Adam Bellow, that nepotism has produced both positive and negative results in everything from ancient Chinese clans to Renaissance and American families like the

Gores, Kennedys, and Bushes. Practiced badly or haphazardly, nepotism is embarrassing to every- one, including the recipient, but done well it can benefit society as a whole. Nepotism is always found but changing the way or the approach from generation to another.

Craig E. Aronoff and John L. Ward’s Explanation of Nepotism

Aronoff and Ward wrote on Nepotism in Family Business Succession: The Final Test of Great- ness. Business Owner Resources, 1992. Craig Aronoff and John Ward give guidelines to have successful use of nepotism. Nepotism in family business requires from members to meet three qualifications before they are allowed to join the family business:

1. Requires a good education; 2. At least three years of work experience; 3. A position that suits their background.

According to Aronoff and Ward (1992), “… outside work experience is the most important for both the business and the individual. It gives future managers a wider experience base that makes them better equipped to deal with challenges, let them learn and make mistakes before coming under the watchful eye of the family, make them realize what other options exist and thus appreciate the family firm, and provides them with an idea of their market value”.

Aronoff and Ward also suggest that family members begin their association with the business by working part-time during their school years or participating in internships. In addition, they stress that companies who hire family members should make it clear to the individuals that they will be fired for illegal or unethical behavior, regardless of their family ties. Finally, they recommend that family businesses encourage their employees to

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maintain outside associations in order to avoid problems associated with a lack of creativity or accountability in management. Such steps can improve the employee’s self-confidence and preparation for an eventual leadership role in the business. (Aronoff, Craig E., and John L. Ward, 1992).This is another explanation and approach to nepotism to be successful because it is con- tinuously experienced act in family businesses & small businesses.

Linda C. Wong and Brian H. Kleiner’s Understanding of Nepotism

Some describe Nepotism as giving negative effect in the company and is a bad practice. Accord- ing to Linda Wong and Brian Kleiner (1994), “…trouble arises most often when family and business needs conflict. A family’s purpose is to care of family members; a business must produce quality goods and/or services as efficiently and as profitably as possible. If a company hires or promotes an incompetent family member, other employees may see this is a gross injustice and many complications may result. More directly, the unqualified heir may simply instill policies that drive the company into the ground”. Indeed Nepotism when is badly practiced then it becomes biggest harm to the company.

Current Debate and Consensus

In business, no one seems sure how to talk about nepotism or discuss it openly. Nepotism is con- sidered a good thing for certain companies based on the way it is practiced and still extremely bad effects in other companies. It is considered that Nepotism is mainly practiced in Asian and African companies, which are traditionally based on fam- ily networks, whereas it is a bad word in US and western countries. We will take several cases and debates to discuss about different point of views.

In the business world, is it generally agreed that nepotism is the practice of showing favorit-

ism toward one’s family members or friends in economic or employment terms. “Nepotism is an explanation for the intergenerational transmission of management within family firms. When the founder retires, control of the firm is often trans- mitted to his heir rather than to a hired professional manager” (Burkart, Panunzi and Shleifer, 2003; Bertrand and Schoar, 2006). Bennedsen et al. (2007) and Perez-Gonzalez (2006) find proof that the performance of firms decrease when family succession is involved. Levine, Weinschelbaum and Zurita (2007) have shown that the employer may hire his “brother-in-law” because this gives him utility and this may lead to a higher level of employment. Goldberg (1982) has coined the term “nepotism coefficient” to indicate the increase in the employer’s utility deriving from employ- ing preferred workers (positive discrimination). The studies by Goldberg (1982) and Levine, Weinschelbaum and Zurita (2007) point out that favoritism benefits, in some form, the firm owner, while we analyze a form of favoritism that is detrimental to firm performance.

Just like any subject, nepotism is an open debate, too many concepts, ideas, opinions, and each has its advantage and disadvantage and mainly it relies on the approach or the way prac- ticed. When we hear the word nepotism directly we think about it as unethical behavior however when you study the situations and especially we are referring here to small business for some it is really a good asset if it practiced correctly. We will discuss below several questions and debates around each question.

WILL NEPOTISM BE DESTRUCTIVE OR PRODUCTIVE IN YOUR COMPANY?

Employees usually recommend their family mem- bers and become very happy once these people are hired. They feel responsible and get the feeling of pride and loyalty.

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Maybe some kind of policies’ establishment will help to support nepotism and practicing it in small and big companies instead of forbidding. Some of such policies could be:

1. Policies must be put in writing for all em- ployees and family members to read and understand.

2. These policies must be fair and evenly enforced.

3. No entitlements. Just because you are a member of the business owners, you are not entitled to extraordinary consideration.

4. Nepotism ought to be encouraged for all employees, not only the owner’s family members.

5. Family members are employed only for the positions they are qualified to accomplish. If the owner’s child is best qualified for data entry for instance, that is where they are placed.

6. Members of the family are paid the same as anybody else.

7. Performance should be the sole criteria for promotion.

8. Family members ought not to report to other family members.

9. Family members are on no occasion forced on superiors. Supervisory personnel must know that they have the freedom to hire, fire and promote family members just as they do other employees. Family should not be favored or discriminated against because of who they are.

It is important to mention that such policy of nepotism has been applied in a company called Thomas Publishing Company, a 100 year old fam- ily firm with over 500 employees. Thomas proudly declared his company as a big family. “There are more than 30 examples of nepotism throughout the company. Five Thomas family members, in-

cluding the president and chairman, work in the business. Several husbands and wives met and married while working there. Many examples of mothers and daughters, fathers and sons, sisters and brothers, and other related employees are found on the payroll. Nepotism is a trademark of Thomas Publishing and is used as a marketing tool for the company” (Wayne Rivers, 2009).

WHY NEPOTISM IS CONSIDERED BAD PRACTICE IN BUSINESS COMPANIES

The horror stories coming from nepotism is from those firms that don’t insist on fair and evenly enforced policies. It is understandable that parents who have spent a lot of money and time raising their children want them to take over. However, it is not always in the interest of the firm to have these children later in charge. Nepotism should be studied and properly designed in case a family member is to be hired.

Using Influence, Power, or Contacts of Parents and Relatives

Nepotism in not always bad, when the good inten- tions are there and when it is used to the benefit of both parties. If the candidate has the qualifications of the vacancy and recruiter is familiar with the intermediate then it is good recruitment by saving time, meeting the objective, and hiring reliable and trustworthy person.

If this goes the opposite way, then this same person is taking an opportunity of another desir- able person whom can benefit from the job and benefit the company from his skills. Again it all matters on the situation, conditions, and inten- tion of the people. When it is startup business, Nepotism is important aspect in hiring process especially because owners will be looking more

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into hard workers and reliable people which for them could be relatives, family members, or even relative/family member of a close friend of them or someone reliable they know who is already work- ing with them. They usually welcome candidates through references especially when the reference is reliable. (Sandra Swanson, 2005)

IS NEPOTISM RELATED TO SOCIAL CULTURE?

There is a debate says that nepotism in organiza- tion is the outcome of two social morals. Culture of the office in one side, and social distance and reciprocity on the other. When one is weak the other is strong. Means when the culture is strong then everybody abides by the rules whereas when the morals are strong organization behavior tends to be influenced by personal relations and here exists nepotism.

A study which was done by Simon UlrikKragh of Department of Management and Intercultural Communication (Copenhagen Business School) which identifies the above debate between dif- ferent cultures.

• Nepotism in Ghana and Kenya it was rec- ognized that they are more into personal relationships.

• Nepotism in Nicaragua and Columbia the office of the first which is more influenced by ethos.

One overall conclusion from this debate is that organizational behavior in modernizing societies is closely related to their position on the path from traditional to modern socio-cultural and economic conditions. The high incidence of nepotism in both its negative and positive dimensions is not primar- ily due to national socio-cultural differences, nor is it the result of a global diffusion of values and norms across countries (Simon UlrikKragh).

WHEN NEPOTISM PAYS INSTEAD OF HARD WORK

It is not because of the hard work you get paid but because of how much you are favored in the company based on being relative. What plays an important role in getting promoted?

• 6% seniority, • 26% doing good work, • 48% connections (e.g. they’re the boss`s

son), • 18% being well-liked.

What is nepotism about? It’s all about access, care, and skills.

• Access: No matter how good you are if you do not have the power, influence, or the contact you will not go ahead.

• Care: When you have the access it is not just about it, you should have the care of those powerful people to go further.

• Skills: Having the access and care then all what it matters is the skills (Keith Ferrazzi, 2011).

Reading all about nepotism, listening to differ- ent point of views, finding out the advantages and disadvantages, still doesn’t cover one important question: is nepotism ethical? Based on different theory understandings, if you are to consider Utility theory of then we will need to find out the outcome of the act whether taking a decision under nepotism will be productive and effective to the company, if so then it is an ethical act. On the other hand, if we are to look into duty obligation theory, then the act itself is not correct no mat- ter what kind of outcome we will have. So these are different theories which depends on personal perceptions which theory to choose.

In business cases utility theory is the most applicable, which means we have to look to the

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best way to have efficient and effective outcome. If following nepotism will add value on the above, then definitely we should follow. But at the same time, there should be strict obligations and conditions to follow nepotism. Not favoring people on others just because of relatives or son or brother or else.

FUTURE TRENDS

Nepotism, favoritism and cronyism, which can be seen in all sectors of today’s business world, have become quite common behavior. The granting of privileges to certain individuals is an extremely disturbing situation to the organization’s em- ployees and the lack of trust arising under such conditions negatively affects job satisfaction, or- ganizational loyalty, and individual performance, and can hinder the internal control system in the auditing process (Keles et al., 2011).

As long as there is no right or wrong, then there is no general convincing situation but rather there is case by case decision making situation. Nepo- tism is something can’t be cancelled or forbidden because general after generation is being followed but through careful studies and teachings, it can be beneficial most of the cases. Unless people will continue living by relying on others powers to reach the top. Question will remain relevant in the immediate and far future:

1. If we follow nepotism with all its condi- tions protecting employee rights, then will it be considered an ethical behavior to hire relative?

2. If nepotism is bad for all type of business, then how can an heir follow his/her fathers or parents business? Can a stranger consistently do better?

3. If you have forbidden nepotism and it is a bad attitude by the company policy, then are you going to follow the rule of firing one of

couples who got introduced to each other in the company knowing that both of them are in managerial position and have strategic role in the company?

CONCLUSION

So solve the dilemma, each case of nepotism or possible nepotism can be addressed from the following perspectives: is it a short term or long term decision? What is the result of the decision in the short term versus in the long term? If we are to take decision to hire a person who is a relative of one of the existing employees are we solving the problem of fulfilling the vacancy? Or we are opening a gate for open nepotism decisions? By hiring this same person are we being unfair by not providing this same opportunity to another skilled and better person? Here is the case of having individual versus community.

Policies that help support nepotism must be put in writing for all employees and must be fair and evenly enforced.

• No entitlements or extraordinary consideration.

• Nepotism ought to be encouraged for all employees, not only the owner’s family members.

• Family members are employed only for the positions they are qualified to accomplish. If the owner’s child is best qualified for data entry for instance, that is where they are placed.

• Members of the family are paid the same as anybody else.

• Performance should be the sole criteria for promotion.

• Family members ought not to report to oth- er family members.

• Family members are on no occasion forced on superiors.

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REFERENCES

Aronoff, C. E., & Ward, J. L. (1992). Family business succession: The final test of greatness. Business Owner Resources.

Bellow, A. S. (2004). Praise of nepotism: A history of family enterprise from King David to George W. Bush. Anchor Books.

Bennedsen, M. S., Nielsen, K. M., Pérez-González, F. S., & Wolfenzon, D. S. (2007). Inside the fam- ily firm: The role of families in succession deci- sions and performance. The Quarterly Journal of Economics, 122(2), 647–691. doi:10.1162/ qjec.122.2.647

Bertrand, M. S., & Schoar, A. S. (2006). The role of family in family firms. The Journal of Eco- nomic Perspectives, 20(2), 73–96. doi:10.1257/ jep.20.2.73

Burkart, M. P. F., & Shleifer, A. S. (2003). Family firms. The Journal of Finance, 58(5), 2167–2202. doi:10.1111/1540-6261.00601

Danna, Z. (2011). Ethics commission defers nepotism decision. Academic Press.

DenizGevrek, Z.S., & EylemGevrek, S. (2008). Nepotism, incentives and the academic success of college students. Academic Press.

Ferrazzi, K. S., & Raz, T. S. (2005). Never eat alone: And other secrets to success, one relation- ship at a time. Random House Digital, Inc.

Goldberg, M. S. (1982). Discrimination, nepo- tism, and long-run wage differentials. The Quar- terly Journal of Economics, 97(2), 307–319. doi:10.2307/1880760

Keles, H. N., Özkan, T. K., & Bezirci, M. (2011). A study on the effects of nepotism, favoritism and cronyism on organizational trust in the audit- ing process in family businesses in Turkey. The, 10(9), 9–16.

King Country Board of Ethics. (2009). Nepotism as a conflict. Author.

Kneale, K. (2009). Is nepotism so bad? Academic Press.

Leslie, C. T. (2006). What is nepotism? Office of Legal Counsel.

Levine, D. S., Weinschelbaum, F. S., & Zurita, F. S. (2007). The brother in law effect. UCLA.

Manuel, F. B. (2008). Top civil service: Meritoc- racy or nepotism? Academic Press.

Michela, P. S., & Vincenzo, S. S. (2010). A simple model of nepotism. Academic Press.

CEO Mommy. (2007, October 17). Nepotism vs. families in business. Author.

Nelton, S. S. (2011). Nation’s business. Academic Press.

Nettopdf. (1996). Employment of related persons. Author.

Nettopdf. (2007). Nepotism. Reference for Busi- ness.

Rivers, W. (1997). FBI’s mission is to deliver interpersonal, operational and financial solutions to help family and closely held businesses achieve breakthrough success. Academic Press.

Scott, E.S. (2008, September 23). Why nepotism is good for business?. Vsellis.

Star Online. (2011, September 25). Nepotism talk grows louder with Nurul’s decision. Star Online.

Verhezen, P. S. (2010). The return of a gift: Trust, social capital and the limits of reciprocity. Aca- demic Press.

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KEY TERMS AND DEFINITIONS

Career: Lifelong path of professional duties and job positions held by a specific worker.

Discrimination: Differential treatment based on specific demographic criteria resulting from stereotyping or prejudice.

Family: Basic unit of society, its nuclear form is built around parenthood and its extended form evolves in generations.

Favoritism: Preferential treatment of one member of a population over the rest due to a variety of factors.

Nepotism: The practice of recruitment inside the family where preference is given arbitrarily to family relatives.

Qualifications: Set of skills, competencies, and talents that make an individual best prepared to fill a position and perform specific functions.

Recruitment: Active discretionary process to attract qualified individuals in order to fill a job vacancy.

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150

APPENDIX

Learning Objectives

L.O.1: Define nepotism. L.O.2: List guidelines for the successful use of nepotism. L.O.3: Determine the disadvantage of nepotism. L.O.4: List policies that help support nepotism. L.O.5: Discuss the relation between nepotism and culture/societies.

Summary

Define Nepotism

Nepotism is the act of hiring relatives in the same company over other candidates.

List Guidelines for the Successful Use of Nepotism

Nepotism in family business requires from members to meet three qualifications before they are allowed to join the family business:

1. Good educational background; 2. At least 2 years of work experience; 3. Start by working part-time during their school years.

List Policies That Help Support Nepotism

Policies must be put in writing for all employees and must be fair and evenly enforced.

• No entitlements or extraordinary consideration. • Nepotism must be encouraged for all employees, not just members of the owner’s family. If every-

one has the opportunity to recommend a member of their family for a position, the playing field is level.

• Family members (both those of the owner and of other employees) will be considered and hired only for the positions they are qualified to perform.

• Family members will be paid the same as anyone else who would fill the position. • Performance alone must be the criteria for advancement and promotion. • Family members should not report to other family members. • Members of the family are never forced on managers.

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Discuss the Relation between Nepotism and Culture/Societies

Organizational behavior in reforming civilizations is associated with their position on the way from tra- ditional to modern socio-cultural and economic circumstances. Nepotism in both its bad and good scopes is not mainly a result of national socio-cultural variances, nor is it the outcome of a global dispersion of morals and standards across nations.

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DOI: 10.4018/978-1-4666-7254-3.ch013

Whistle Blowing

ABSTRACT

Whistle blowing brings to the notice of the world wrongdoings and immoral acts. It is seen as an act of defense for proper action for any misconduct, which is at play between individual coherence and orga- nizational values. Whistle blowing is an important way to prevent and deter fraud, waste, and abuse in organizational work environments. When employees are feeling uncomfortable with wrongdoing, which necessarily arises in organizations, their sense of morals also come into effect, which compels them to make any wrongdoing or unethical act public. In essence, the interplay of policies and its discourse that make it mark in organizational realms figure within that morality consideration; morality permits individual to act morally and reasonably. This chapter explores whistle blowing.

INTRODUCTION

Whistle blowing is the disclosure by organization member whether former or current employee on any illegal, immoral, or illegitimate practices to outside party or person within an organization so that action can be taken in the right order of things. From an ethical point of view, the root of whistle blowing and the object which makes whistle blower and their acts is the ethics being compromised. This means that the strength of character can vary depending on the will of indi- vidual and their reason to act.

BACKGROUND

Whistle blowing is not a new term. Whistle blowing and the term attached to it is somewhat perceived negatively (Steven H Appelbaum, 2006). When we observed the realms today we feel that it is fraught with many dangers of ethi- cal issues making inroads within the company. Fact of the matter is that “…whistle blowing is a very dangerous path to be taken by employees, as this can attract many legal and disciplinary actions (Goran Svensson, 2009). But we wonder what makes whistle blower take the risk to blow

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the whistle after all? Part of it can be looked in respect ethical conflict at play. Moreover, there have been instances which showed that despite accepting the responsibility of whistle blowing, individual seems to be hesitant, especially internal auditors due to the risk of their career (Mark Keil, 2001, p. 90). For that very reason, we assume that whistle blowing and its impact is linked one or the other way with ethical consideration and the conflicting part of it.

In the organizational realms there are innumer- able question of ethical issues and ethics being compromised for all the good bad and ugly reasons. Moreover, corporate governance also comes into play in such instance. According to some scholars, they held that “firm governance influence the qual- ity of its voluntary disclosure.” (Denis Cormier, 2010, p. 576) But if there is voluntary disclosure why so the idea of whistle blowing arises?

In the organizational realms there have been many instance which shows that ethical issue are internal and can expand to the range where the world at large also have an insights. It is only through a whistle blower that the public are aware of the real thing and corruption is brought to book. (Kreikebaum, 2008, p. 87). But what brought about internal company informative insights to be dis- seminated into the big bad world, either through whistle blower or so? As we have said ethics is at the root of it. It is about moral conduct of any wrong doing, which generally don’t need to justify an act, since every acts and action have a reason behind it whether we think it is right or wrong. (Davis). For this very reason, whistle blowing and the topic of its discussion comes into play within the organization and whistle blowing have often been thought to either be a bad influence or a rather good influence.

DEFINING THE MEANING OF WHISTLE BLOWING

There are many definition related to whistle blow- ing. Whistle blowing can mean an act of notify- ing the wrong doing practices in an organization and is motivated by the desire to prevent harm to others. It also takes into account the action of an employee or employer with a privilege access to internal information in an organization. (Annette D Greene, 2004, p. 220). In the word of Near and Miceli (1995) whistle blowing can be understood as the disclosure by organization member whether former or current employee on any illegal, im- moral, or illegitimate practices to outside party or person within an organization so that action can be taken in the right order of things (Janet P. Near, 1995, p. 680).

According to Rocha and Kleiner (2005) whistle blowing and the word related to it have been around since the early 1970s. It relates to the wrongdoing from someone inside the company as opposed to the wrong doing by someone from outside the company (Ester Rocha, 2005, p. 80). The idea of whistle blowing is all about allegation that roots within and outside the company. Some scholars went to the extent also to define whistle blowing in term of attitudes and values (Rothchild, 1999, p. 116).

What is surprising is that some scholars and their research show that at the heart of whistle blowing situation, a loyalty conflict is the domi- nant part of it involving employee and employer relationship. Whistle blowing in that sense of the term is understood as an act of disloyalty which very often disrupts business and also injured the reputation of the organization (Andrea Bather, 2005, p. 5). This sound very true, as there have

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many instances which shows that disloyalty have been a subject of whistle blowing in organization. Yet we are of the opinion that whistles blowing in term of ethics holds it value also, which the following discussion relates to.

Theory A: Ethics as a Subject to Whistle Blowing

From our understanding, we belief that at the root of whistle blowing scenario and the object which makes whistle blower and their acts is the ethics being compromised. In the business world, ethics and its consideration is a heated subject of debate. Scholars also have gone to the extent which states whether ethical issue and its consideration are a part of the problem or a solution involving individual within organizational realms. Business revolves around many compelling aspects, and when it comes to ethics, we assume that some- thing somewhere is lost in between. Moreover, scholars assert that “moral intensity differs from one issue to the other.”(Nathan C. Whittier, 2006, p. 237) This means that the strength of character can vary depending on the will of individual and their reason to acts. An in that sense of the term we can reason that the act of whistle blowing is correlated. Thus, this is one theory we can see at the root of whistle blowing which finds it place with ethics.

Theory B: Justifying the Idea behind Whistle Blowing

According to Michael Davis the standard theory in argument is not about whistle blowing to be precise, but the act of whistle blowing and its justification, whether to say if an act is reason- able or not. (Davis) In that sense of the term we believe that accountability also find a place of consideration when it is associated with issue

of accountability, (Brennan, 2008, p. 886) and necessarily whistle blowing can streamline orga- nization process. As scholar asserts, the goal of any organization is to create an ethically minded organization by developing a shared ethics, which individual agrees to be reasonable so that it gen- erate positive organizational behavior (Steven H. Appelbaum, 2009, p. 526). But how does such a development course undertake? We feel that the morality aspects as Davis asserts also have some relevance to it. In that essence the interplay of policies and its discourse that make it mark in organizational realms figure within that morality consideration.

To top it all, as more and more employee are feeling uncomfortable with wrong doing which necessarily arise in organization, their sense of morals also come into effect which compelled them to make any wrong doing or act of unethical by making it public (Ester Rocha, 2005, p. 80). This is somewhat like what morality permits individual to act morally and reasonably (Davis, p. 3).

Theory C: Organizational Behavior and Work Environment

Somewhat we are placed in a situation that often conflict with our very morals and reasoning. We are forced to do certain thing which we would not have obliged in principles, yet practically such things happen. The same case also can be looked in respect of the work environment, where we are compelled to adhere with the responsibility and commitment to certain things (Mette Sandoff, 2009, p. 201).

Moreover, in organization discourse, there are many compiling issues and at conflict with one another. Somewhat the term wicked problem also come into play which defines that knowledge sellers in the business world don’t only compete only for clients but also for better solution (Wexler,

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2009, p. 535). Would not a case of immorality bring to fore in search of that perfect solution, where fraud are committed? It is very likely and also brings to the question ethics in organization, since it is built on a shared set of understanding as to what is right or wrong or how ethical issue should be handled (Laratta, 2009, p. 359).

WHISTLE BLOWING: CURRENT DEBATE AND ITS CONSENSUS

There are various debates making the rounds when it comes to whistle blowing in organizational structure. Some scholars are of the opinion that integrating ethics is the core basis of any orga- nizational undertaking, and its corporate gover- nance, which should be expanded into the realms of social phenomenon (Steven H. Appelbaum L. V., 2009, p. 529).

We think that whistle blowing is right and correct to bring to the notice of the world the wrong doing and any immoral acts. To top it all, whistle blowing can be seen as an act of defense for proper action for any misconduct, which is at play between individual coherence and organizational values (Mette Sandoff, 2009, p. 206).

Thus what we can arrive at a conclusion is that consensus debate for that matter can be looked to the arguments which supports that “whistle blowing is an important way to prevent and deter fraud, waste and abuse,” (Dennis Hwang, 2008) in organizational work environment.

Whistle Blowing: Functional Debate

In recent time, the originations of Wiki-Leaks also have given a new dimension as to what whistle blowing can mean and how far journalism can take its tread to define the very aspects of the social conditioning and its discourse when it comes to the ethical and unethical issue within and outside the company or organizational realms.

Dishonesty and ethics being compromised is not a new thing at all, but a matter of account- ability and corporate governance thus helps root out such issue (Stuart Turley, 2007, p. 77). Such a situation for that matter leaves groups and in- dividual within an organization with little choice to tolerate instance of dishonesty or ethics being compromised, which breeds the very object of whistle blowers which normally report any concern to those who matter (Stuart Turley, 2007, p. 77). Fact of the matter is that whistle blower can either be bad or good. Yet above all, their act reflects a sense of personal ethics or a sense of duty to say to any wrong doing any organization that don’t seems right to them and their moral judgment (Steven H. Appelbaum G. D., 2007, pp. 589-590).

INTERPRETING WHISTLE BLOWING: UNANSWERED CONCERN

Whistle blowing may have both short and long- term consequences for individuals, groups, orga- nizations and society at larger. Support for whistle blower and whistle blowing arise when there is something to reveal about unethical behavior of action that is taking place within the organizational realms so that wrong doers are exposed and brought to book (Goran Svensson G. W., 2009, p. 181).

Thus unanswered concern when looked to at such a situation can be reflected in context of the subject debate and its discourse that reflect the realms of business ethics, professional conduct and sense of duty. Besides, it can also engender increased societal trust in organization. On the other hand, organizational effectiveness also can be linked to acts of whistle blowing. These are some of the unanswered question and concern as to what whistle blowing can relate to.

When we consider the term “whistle blowing” we do not go back much in time, we look upon it as a recent expression, even though the sort of behavior to which it refers is not entirely new,

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having in mind the narratives of King David that we read in the Bible more than 2000 years ago. It is possible that many people don’t deliberate blowing the whistle, not just out of fear of retali- ation but also out of fear of losing their relations at work and outside their job. In many parts of the world persecution of whistle blowing has become a major issue that they had to come up with rules and legislations. Nowadays, more than a dozen countries have comprehensive whistle blower protection laws, which provide mecha- nisms for reporting, investigating and providing legal protection.

In the United States the first law adopted specifically to protect whistle blowers was the 1863 United States False Claims Act -which was revised in 1986- the law was put to fight fraud by suppliers of US government during the Civil War. It protected whistle blowers from unfair dismissal and encouraged them by promising monetary returns by the government. In July 30, 2002 the Sarbanes-Oxley Act was enacted to protect cor- porate fraud whistleblowers, after the collapse of Enron and WorldCom. Securities whistle blowers were provided in 2010 by the Dodd-Frank Wall Street Reform and Consumer Protection Act. This regulation allows the SEC to recompense those who deliver information regarding abuses of the federal securities laws at corporations that are obligated to report to the SEC. Moreover, the law forbids bosses from hitting back against whistleblowers. Employers may not fire, demote, suspend, threaten, harass, or discriminate against a whistleblower.

In the United Kingdom the whistle blowers are protected by the Public Interest Disclosure Act which was put in order in 1998 to provide a framework of legal protection for whoever discloses information of malpractice and unethi- cal conduct. In 2011, the Australian government promised to adopt a new law concerning the protec-

tion of whistle blowers, in contrast to what former NSW Police Commissioner Tony Lauer stated that “nobody in Australia likes whistle blowers”. In 2010 and onwards, a number of countries took up and implemented comprehensive whistle blower laws like Jamaica, Ireland, India, New Zealand, Ghana, Kenya and Uganda.

In 2012, Lebanon is still one of those countries that do not have a law or legislation that protects whistle blowers. However, there is an association called the Lebanese Transparency Association (LTA), which is the national chapter of Trans- parency International (TI), and supported by the UK Department for International Development (DFID) has launched Lebanese Advocacy and Legal Advice Center (LALAC). LALAC is one of those organizations that help victims of corruption by providing them with efficient legal advice. Its primary goal is to advice legally how to proceed in filing cases with no fee. Most of the cases re- ported with corporate fraud do not make it to the court as per the center’s project manager because of the absence of whistle blower protection law, “no law protects people who come forward with complaints about corruption”.

US Case

At a Company, which is a utility based near Buf- falo, New York, a well- paid corporation lawyer claimed that the chief executive and president had ordered him to predate their stock options on forms acquiesced to Security and Exchange Commission in a way that made the options worth considerably more. The company sued the lawyer successfully for the return of the documents that might have provided proof. It went beyond that and persuaded a local court to ban him from practice. Next, he was fired and the court ruled that he undergoes psychiatric treatment, a ruling which was then inverted on appeal on the grounds that

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it was not legal, however, not before he had been “treated”. Finally, an authorized investigation into the subject was angry at the unfortunate death of the chairman of the corporation’s compensation committee.

Lebanese Case

LK is an administrative employee at a local bank in Beirut. She was hitting her career ladder to become a prominent figure in the human resources depart- ment. After her first promotion, one of her duties was to check the process of annual performance appraisal step by step, provide guidance on the merit increase decisions, and follow up on each employee compensation plan. While doing her job, she found out that the human resource manager was altering the true results of the performance appraisal to the benefit of the person who is fa- vored by him. LK was bold enough to confront him and at a later stage took the issue to higher level. But no one agreed with her that this issue was unethical, on the contrary they demoted her and put her in a situation that she is “biting the hand that is feeding her”. LK had no other option but to quit, because the culture of the bank had no place for an individual like her and no back up for whistle blowing activities.

Actual Resolution

In the foreign case, the consequences of whistle blowing were very substantial and immense. Not only was the whistle blower dragged into courts but, lost his job, his income, his future career, his network of colleagues, and last but not least was forced to undergo psychiatric treatment. These are huge private disincentives for blowing the whistle.

In the Lebanese case, LK’s decision of leaving her job was the best alternative because of the lack of protection of whistle blowers. However, because no law exists in Lebanon that would assist

in her whistle blowing, and the Bank didn’t sue her because of the Lebanese culture, she wasn’t affected much beyond losing her job.

Proposed Resolution

Employees should have the right to report wrong- doing. Accordingly, all companies are expected to implement whistle blowing policies and continu- ously revise them. The policy should indicate who is covered under the policy and how the whistle blower will be protected to avoid all the negative situations that whistle blowers had to go through. A whistle blower should have good documentation of the evidence of wrongdoing before disclosing it to others. If we want to follow utilitarian laws, then the whistle blower should take into account and abide by the pleasure versus the pain theory. If the act of whistle blowing will generate less pain than pleasure to a greater number of people, then it is a good act; if not then it is wrong.

Some say that whistle blowers are heroes in the sense that they uncover immoral subjects in spite of knowing that they will be going up against their bosses and companies who have the money to hire excellent lawyers to protect themselves against allegations. These people are heroes since they knowingly put their jobs on the line just so the public would get a chance to know the truth. It is very clear that with the current whistle blower pro- tection system, employees would hardly engage in such an act. New regulation must be implemented that will take into consideration the protection of the whistle blower using different areas: economic, financial, social and legal. These are necessary to make the whistle blower whole again.

LESSONS LEARNED

Today in Lebanon, passing a law that protects whistle blowers seems a farfetched task. But be-

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cause of the legislations and the laws that have been enacted worldwide securing both governmental and private sector support to protect the whistle blower, as a result of the scandals presented in different communities, I believe it is just a matter of time before we shift from our current stand of not recognizing and maintaining whistle blowing acts to the stand of not tolerating whistle blower punishment and penalty. Ethically, employees do have the right to report wrongdoing. Kant’s deontology of moral law proposes that it is the morally good thing to pinpoint the wrong to protect any party that will be hurt, including the whistle blowers themselves.

If whistle blowing culture is encouraged in any organization, then those organizations promote, transparent structure, effective and efficient com- munication. Moreover, whistle blowing activities go beyond the boundaries of the organization; they can protect the customer as a positive result, because the unethical practices harm the whole environment of the organization.

FUTURE TRENDS

There are at least four significant obstacles to whistle-blowing to regulatory institutions. “Regu- latory institutions are often understaffed and don’t have the resources needed for whistle-blowing cases. Regulators of whistle-blowing cases are often inexperienced. Regulators are often under pressure from the politicians who appoint them to ignore whistle-blowing cases. There are also high risks to whistle-blowers who blow the whistle to regulatory institutions” (Nielsen, 2013). Neverthe- less, thinking about how the establishments and complications function can assist us in understand- ing what kinds of whistle-blowing approaches may be used to traverse around the complications and

the regulatory institution. Moreover, occasionally whistle-blowing approaches may assist in reform- ing regulatory institutions.

“Whistle-blowing issues raise debate. Develop- ments in law and in corporate governance along with the development of some special functions inside of an organization have been an impetus in widening the debate on whistle-blowing and in encouraging moves to better and more transparent disclosure arrangements,” (Susmanschi, 2012). Whistle-blowing is regarded to be both a threat and an asset that has played a major role in many researches. People have always showed an interest in whistle blowing, questioning about its scope, who the whistle-blowers are, what motivations they have to be able to blow the whistle, and what the consequences of whistle-blowing are (Susmanschi, 2012).The role play of the internal auditing in the act of whistle-blowing is a task intended to assist the management and further improve both the management‘s performance as well as the company’s performance.

The presence of whistle blower within the functionary mechanism cannot be sided apart. This poses many dangers and innumerable ethical issues. Whistle blowers have been known to be present in every organization. There is no denying this fact. Hence, the subject matter debate for future research can be ample to explore and examine the dominion of whistle blowing and its discourse.

CONCLUSION

Many scholars believe that there is no universal acceptance of whistle blowing. Some theories for that matter are as awkward as it appears as well. We are of the opinion that behind any visible acts of whistle blowing there is an ethical theory at play. By ethical we mean the moral jurisdiction as

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to what defines the good and bad aspects of any actions being undertaken such as disclosure of internal organizational information. Therefore the following questions require further investigation:

• What leads the way for whistle blowing situations to arise? Do ethics, moral be- liefs and sense of guilt’s form the basis of whistle blowing within the organizational realms?

• What does it mean when the information disclosed to the public is classified? If such is the case does not the essential of fraud come into play? Behind every whistle blowing act there is a moral action at play as well. Yet this is subject to debate as well.

• What are the moral obligations that whistle blowers and theirs actions justify to the or- ganization, third party or to the society at large? And finally,

• What are the long-term and short-term consequences of whistle blowing and how are they making inroads into organization- al realms and their culture?

REFERENCES

Andrea Bather, M. K. (2005). Whistle blowing: The advantages of self regulation. Hamilton, Canada: Waikata Management School.

Annette, D., & Greene, J. K. (2004). Whistle- blowing as a form of advocacy: Guidelines for the practitioner and organization. Social Work, 49(2), 219–230. doi:10.1093/sw/49.2.219 PMID:15124962

Brennan, N. M., & Solomon, J. (2008). Corporate governance,accountability and mechanisms of accountability: An overview. Accounting, Audit- ing & Accountability Journal, 21(7), 885–903. doi:10.1108/09513570810907401

Davis, M. (n.d.). Some paradox of whistle blow- ing. Business and Professional Ethics Journal, 15(1), 3-19.

Denis Cormier, M.-J. L. (2010). Corporate gover- nance and information asymmetry between man- agers and investors. Corporate Governance, 10(5), 574–589. doi:10.1108/14720701011085553

Dennis Hwang, B. S. (2008). Confucian culture and whistle-blowing by professional accountants: An exploratory study. Managerial Auditing Journal, 23(5), 504–526. doi:10.1108/02686900810875316

Ester Rocha, B. H. (2005). To blow or not to blow the whistle? That is the question. Man- agement Research News, 28(11/12), 80–87. doi:10.1108/01409170510785264

Goran Svensson, G. W. (2009). Cross-sector orga- nizational engagement with ethics: A comparison between private sector companies and public sector entities of Sweden. Corporate Governance, 9(3), 283–297. doi:10.1108/14720700910964343

Goran Svensson, G. W. (2009). Inculcating the ethos of public-sector codes of ethics in Sweden: A longitudinal approach. Corporate Governance, 9(2), 175–188. doi:10.1108/14720700910946613

Janet, P., & Near, M. P. (1995). Effective whistle- blowing. Academy of Management Review, 20(3), 679–708.

Kreikebaum, H. S. (2008). Corruption as a moral issue. Social Responsibility Journal., 4(1/2), 82–88. doi:10.1108/17471110810856857

Laratta, R. S. (2009). Ethical climate in nonprofit or- ganizations: A comparative study. The Internation- al Journal of Sociology and Social Policy, 29(7/8), 358–371. doi:10.1108/01443330910975678

Mark Keil, F. D. R. S. (2001). Blowing the whistle of troubled software projects. Communications of the ACM, 44(4), 87–93. doi:10.1145/367211.367274

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Mette Sandoff, G. W. (2009). Freedom or docility at work – Is there a choice? International Journal of Sociology, 29(5/6), 201–213.

Nathan, C., & Whittier, S. W. (2006). Evaluating ethical decision-making models: A review and application. Society of Business Review., 1(3), 235–247. doi:10.1108/17465680610706319

Nielsen, R. P. S. (2013, February). Whistle- blowing methods for navigating within and helping reform regulatory institutions. Journal, 112(3), 385–395.

Rothchild, J. S. (1999). Whistle-blower disclo- sures and management retaliation: The battle to control information about organization corrup- tion. Work and Occupations, 26(1), 107–128. doi:10.1177/0730888499026001006

Steven, H., & Appelbaum, K. G. (2006). Whistle- blowing: International implications and critical case incidents. Journal of American Academy of Business, 10(1), 7–13.

Steven, H. S., & Appelbaum, G. D. (2007). Positive and negative deviant workplace behaviors: Causes, impacts, and solutions. Corporate Governance, 7(5), 586–598. doi:10.1108/14720700710827176

Steven, H.S., & Appelbaum, L. V. (2009). (Good) corporate governance and the strategic integration of meso ethics. Social Responsibility Journal, 525-539.

Stuart Turley, M. Z. (2007). Audit commit- tee effectiveness: Informal processes and behavioural effects. Accounting, Auditing & Accountability Journal, 20(5), 765–788. doi:10.1108/09513570710779036

Susmanschi, G. (2012). Internal audit and whistle- blowing. economics. Management and Financial Markets, 7(4), 415–421.

Wexler, M. N. (2009). Exploring the moral dimen- sion of wicked problems. International Journal of Sociology, 29(9/10), 531–542.

KEY TERMS AND DEFINITIONS

Corruption: Widespread effect of an indi- vidual or a series of actions breaching the purity of a system.

Dishonesty: Attitude based on partial truth or on full lies that results in a lack of faith and a loss of social value.

Loyalty: Unshaken attitude of followership towards a provider or a leader.

Misconduct: Behavior breaking established rules resulting in misdemeanor or crime.

Reputation: Established image perceives by a wide audience after a long time persistent per- formance which can be translated in social value.

Whistle Blowing: Sounding an alarm maxi- mizing noise, usually through public media about an event or a grievance that has been mishandled or settled improperly.

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APPENDIX

Learning Objectives

L.O.1: Define whistle blowing. L.O.2: Discuss whistle blowing from an ethical point of view. L.O.3: Justify the act of whistle blowing. L.O.4: Describe the effect of whistle blowing on an organization.

Summary

Define Whistle Blowing

Discuss Whistle Blowing from an Ethical Point of View

The root of whistle blowing scenario and the object which makes whistle blower and their acts is the ethics being compromised. This means that the strength of character can vary depending on the will of individual and their reason to act.

Justify the Act of Whistle Blowing

When employees are feeling uncomfortable with wrong doing which necessarily arise in organization, their sense of morals also come into effect which compelled them to make any wrong doing or act of unethical by making it public. In that essence the interplay of policies and its discourse that make it mark in organizational realms figure within that morality consideration; morality permits individual to act morally and reasonably.

Describe the Effect of Whistle Blowing on an Organization

Whistle blowing brings to the notice of the world the wrong doings and any immoral acts. It is seen as an act of defense for proper action for any misconduct, which is at play between individual coherence and organizational values. Whistle blowing is an important way to prevent and deter fraud, waste and abuse in organizational work environment.

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Chapter 14

DOI: 10.4018/978-1-4666-7254-3.ch014

Toxic Waste Disposal

ABSTRACT

Recognizing the severity of the toxic waste disposal, approximately 50 countries signed a treaty in 1989 seeking to regulate and control the international shipments that contain toxic waste materials. However, the primary challenge that hinders the proper disposal of hazardous waste remains the high costs of disposal and the time-consuming nature of the disposal process. These two factors constitute the main reasons why some companies seek out clandestine means to dispose of their toxic wastes instead of ad- hering to the laws and regulations, thus endangering both the environment and the health of surrounding living beings. A proper disposal system is essential to guarantee the safety of living creatures, as well as the welfare of the surrounding environment. However, sometimes that is easier said than done, and even disposal techniques that abide by the relevant laws may have unforeseen and devastating consequences on the lives of the employees carrying out the disposal process. This chapter explores toxic waste disposal.

INTRODUCTION

The most critical issue of the century is by far environmental ethics and the way corporations are dealing with the constant threat to the natural resources. Environmental ethics, by definition, is the division of ethics that inspects inquiries of moral right and wrong concerning the manage- ment, defense, or endangerment of the natural resources accessible to us. Toxic waste (also known as hazardous waste) is the material that results mainly from industrial activities and that can prove to be harmful to both living creatures and the environment. More specifically put, toxic waste is waste material, usually in chemical form

that is able to cause death or damage to living beings. It frequently is the product of industry or commerce, but also originates from residential usage, agriculture, military, medical facilities, radioactive sources, and light industry, like dry cleaning establishments. The term is usually used in place of hazardous waste, or discarded material that may have a long-term risk to one’s health or the environment (Columbia Electronic Encyclopedia, 2013). These toxic materials can be disseminated into the environment by air, water and land, rendering them extremely dangerous to living organisms including human beings.

Consequentialist ethical theories stem from utilitarianism. It regards the intrinsic “good or

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bad”, “value or disvalue”, as more important than the “right or wrong”. Right or wrong is determined as whether the consequences of a certain action are good or bad. Hence the answer to the second question brought forward by utilitarianism is a direct effect of the answers to the first question. Environmental ethics requests the consideration of the effects of every decision to be made by the direct consequences it will have on the envi- ronment; the environment meaning not just the natural zone but also of all living beings in the surrounds. For example, when one intends to start a power plant and launch a new industry, he must make sure that this act will not have negative repercussions on the surrounding environment. On a smaller scale, when people in rural areas burn the trash, they are completely disregarding the health issues that come to be as an effect for their reckless action.

BACKGROUND

Pollution: A Brief Description

Assume that extinguishing natural fires or exter- minating some of a heavily populated local species is necessary for the protection of a certain eco- system. Will these actions be morally acceptable? Is it morally permissible for farmers in 3rd world countries to carry out slash and burn methods to empty new grounds for agriculture? Suppose a mining corporation executed open pit mining in some, until that time, untouched area. Does that company have a moral obligation to restore the lands into their previous condition after it’s done? What value does this humanly reformed land have compared with the original natural setting? “It is often said to be morally wrong for human beings to pollute and destroy parts of the natural environment and to consume a huge proportion

of the planet’s natural resources.” These are some of the questions explored by environmental ethics (Palmer & Grün, 2008).

Some observers believe that the term “envi- ronmental business” is actually an oxymoron, and that corporations by definition can never be environmentally friendly. Others argue that businesses have in fact made significant effort to develop an environmentally sound strategy. The wave of concern over the environment and the effects of its misuse has on the public has risen greatly since the very primary concern over coal- derived air pollution to more advanced corporate related environmental ethics such as nuclear wastes, species extinction, solid waste disposal, toxic pollution, deforestation and global warming. As the repercussions of these different concerns accelerated so did the search for new ways to make businesses environmentally responsible.

Environmental ethics falls under the universal ethics theory. Universal ethics states that there exist several ethical standards that seem to apply across cultures. The environment and its sound existence, is one that concerns the world as a whole. Therefore the set of standards business act on regarding the environment affects not only the country itself but also the whole region near it. The ethical standards regarding environmental ethics do apply across cultures however with a slight little relativity in its implementation. For example, while everyone views recycling as an important matter, it is taken more seriously and implemented more thoroughly in the Western world than in the Arab world. Likewise, while toxic pollution in the US takes a big part in the media coverage and in the work of NGOs, it is not a focus of the public in our region. Public awareness campaigns have not impacted the public the way it should be. Due to this particular capability of toxic waste to spread throughout its surrounding environment and pose a serious long-term risk to the health and wellbeing

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of living organisms around it, several laws have been put into effect in order to ensure the proper disposal and treatment of these waste materials so as to limit or negate their possible harm. A quick glimpse of these laws includes:

1. The Toxic Substances Control Act of 1976 which required the Environmental Protection Agency to regulate potentially hazardous industrial chemicals, including halogenated fluorocarbons, dioxin, asbestos, polychlori- nated biphenyls (PCBs), and vinyl chloride.

2. The Atomic Energy Act of 1954. 3. The Resource Conservation and Recovery

Act (1976). 4. The Comprehensive Environment al

Response, Compensation, and Liability Act, or Superfund Act (1986)” (Columbia Electronic Encyclopedia, 2013).

Environmental Ethics Background: History

Environmental ethics as a discipline first started to emerge in the early 1970s. It came about to refute previously prevalent and socially accept- able behaviors regarding the environment. Man has always viewed himself and his interests as the center of every goal. Many prevalent theories are human centered. They advocate an intrinsic value to humans and believe that non-human entities exist solely to provide humans with the means to achieve human interests or maintain their well- being. These theories are anthropocentric perspec- tives. “Nature has made all things specifically for the sake of man” a famous statement by Aristotle further proves that the values of nonhuman entities are purely instrumental. “When environmental ethics emerge in early 1970s, it posed a challenge to traditional anthropocentrism. It questioned the assumed moral superiority of human beings to members of other species on earth. It also inves-

tigated the possibility of rational arguments for assigning intrinsic value to the natural environ- ment and its nonhuman contents.” (Palmer & Grün, 2008). Anthropocentrism, henceforth, gave man an unconfined license to exploit the natural resources present on the planet such Asia, Africa and the Americas.

This thinking long devastated the lands and exploited most of the resources. Soon after an- thropocentrism’s prevalence came the academic work that rang the sirens for the environmental crisis was Rachel Carson’s Silent Spring (1963). Carson brought light upon commercial farming practices. She states that these practices were negatively impacting both the environment and the public health more than helping it. Later on in 1973, Richard Routly an Australian philosopher came forward with “land ethics”. He attempted to stretch the human moral concerns to include not only the natural environment but also the non-human constituents that make it up. Routly believed that the dominant traditional approaches for western moral thinking stopped the citizens from recognizing “that natural things have intrinsic value, and that the tradition required overhaul of a significant kind.” (Palmer & Grün, 2008)

Aldo Leopold’s book A Sand County Almanac (1949) adopted the “land ethic”. Land ethics, was the preliminary reference to environmental ethics, as we know it today. He suggested that the “land” should be an entity for human moral concerns. He argued that there exists a set standard of moral obligations that one should have regarding the ecological system and its different elements (spe- cies, ecosystems, etc.).

The convergence of political, legal and ethi- cal debates regarding the environment, and the surfacing of different philosophies that advocate animal and environmental rights led to the rise of environmental parties in Europe in the 1980s. This rise was simultaneous to ongoing schisms that appeared between two groups, the “realists”

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and the “fundamentalists”. “The ‘realists’ stood for reform environmentalism, working with business and government to soften the impact of pollution and resource depletion especially on fragile eco- systems or endangered species” (Palmer & Grün, 2008). “The ‘fundies’ argued for radical change, the setting of stringent new priorities, and even the overthrow of capitalism and liberal individualism, which were taken as the major ideological causes of anthropogenic environmental devastation” (Dobson, 1992). It was the astounding land ethic theory, in addition to the various warnings from scientists that focused the world’s attention on the environment.

CURRENT STATE

A case study authored by Hae-Kwan Cheong et al. and published in2007, sheds light on the five factory employees working at an industrial waste plant who contracted acute toxic hepatitis while disposing of hazardous waste materials. The in- vestigation revealed that the most probable cause of this unfortunate outbreak was in fact the change in the waste disposal process that was in effect in the plant. In fact, it was uncovered that the waste disposal workers had been working in a high vapor- generating area of the plant and had been handling toxic chemicals with “hepatotoxic potential” including pyridine, dimethylformamide, dimeth- ylacetamide, and methylenedianiline (Cheong et al., 2007). It is assumed that the inhalation of one or several of these chemicals is responsible for the hepatitis outbreak which claimed the life of one of the five workers.

Due to the nature and the composition of some toxic waste materials, special procedures must be undertaken before land filling (Ferdowsi, Ferdosi & Mehrani, 2010). In the medical field, hazardous waste materials are divided into two categories: in-

fections and non-infectious. Infectious toxic waste require special treatment before being transported to landfills in order to neutralize the infectious agents that may cause harm to living organisms (primarily human beings). There are two main procedures used in treating infectious medical waste which are incineration, and autoclaving (Ferdowsi, Ferdosi & Mehrani, 2010). However, there has been a lot of recent criticism targeted towards using the incineration method due to the fact that this method results in the “emission of hazardous gases such as CO2 and CO as well as Carcinogenic gases such as Dioxins and Furans which are generated as a result of incomplete combustion of compositions like PVCs (PolyVinyl Chloride)” (Ferdowsi, Ferdosi & Mehrani, 2010). In a comparative study aimed at assessing and comparing the benefits and the costs of the two aforementioned medical waste disposal methods, Ali Ferdowsi, Masoud Ferdosi, and Mohammd Javad Mehrani uncovered that the autoclaving method was much safer, more beneficial, and more effective at neutralizing harmful agents in the medical waste than incineration.

One innovation that would aid in regulating and controlling waste disposal is the recently developed garbage tracking technology. In 2013, author Samuel Greengard provided an overview of these new technologies. He states that these technologies would “save landfill space, improve recycling rates, and slow the flow of toxic materials into the environment”. He adds that this system would be able to track a portion of the estimated 2 billion tons of waste that humans across the globe generate during a year by using “bar codes, passive and active radio frequency identification tags, cellular transmitters” as well as other tech- nologies. This is particularly helpful due to the fact that, contrary to popular belief that associates toxic wastes with large industrial plants, regular households also contribute a fair share to the haz-

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ardous material pool (Lerner, 2011). In fact, the hazardous waste that is generated by households has a considerable effect on the environment, yet, these households are for the most part exempt of the laws and regulations that seek to control and limit the detrimental effects of toxic waste on the environment (Lerner, 2011).

Environmental Ethics: Utilitarian Theory

As much as environmental ethicists try to avoid the anthropocentrism implanted in the traditional ethical theories, they often base most of their theories on traditional resources. Utilitarianism is the ethical theory that calls for doing the right for the greatest amount of people. It states that the main goal behind every decision made, is to deliver the most amount of happiness to the maximum amount of people (Palmer & Grün, 2008).Utilitarianism considers two basic moral questions: the first regarding the different kinds of intrinsically valuable decisions and the second question are regarding the constituents that make a certain action right or wrong.

Industrial pollution is never curbed by the na- tional borders of industrial nations. It is, however, of effects on surrounding environments as well. Ice cores collected from the Arctic and Antarctica have depicted high concentrations of industrial pollutants, proving that no distance is too short for pollutants to cross. Moreover, indications of industrial pollutant were found in isolated plant, animal and human populations. Industrial pollu- tion is one that can be directly associated with the industry. Because of the rapid growth of industries around the world, industrial pollution is proving to be a life-threatening problem for planet as a whole. This form of pollution goes back to the industrial revolution in the 1800s and has been accelerating rapidly ever since. The use of fuels to aid in the mass production of products and

generation of electricity was prevalent. It was used extensively with poor understanding of its devastating consequences on the environment (Industrial Pollution, 2003).

There are various types of environmental problems that rise as an aftermath of industrial pollution. Some of these are water pollution, air pollution, and noise pollution.

The negative impact industrial pollution has on the environment and its constituents are im- mense. These pollutants endanger the lives of all living things, imbalance the ecosystem, radically change the planet’s temperature, degrade the qual- ity of air inhaled, and damage water supplies and much more.

The growing concern for the earth’s resources has helped bring to the world’s attention the various environment endangering practices of the indus- tries around the world. Nations have recognized that it is their responsibility to protect themselves and their neighbors from the grave repercussions of industrial pollution. Laws have been passed, conferences held, protocols signed and summits attended all in favor of regulating the pollution spread by industries (Industrial Pollution, 2003). This holds true especially that most developing countries are now entering the race to technological advancements. They now desire to achieve first world standards in production hence adding to the global burden of industrial pollution.

CAUSES OF INDUSTRIAL POLLUTION

The main causes behind industrial pollution can be summarized into the following: unregistered small scale units, lack of pollution control systems, and lack of awareness.

Small unregistered industrial facilities often go unmonitored by the government. They do not adhere to set rules and regulations that would

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regulate their chemical discharges. Hence, the industrial pollution generated is discharged into the area’s drainage systems or other water beds with no treatment. This would cause water pollution. Some industries function with total disregard of pollution control systems. Efficient treatment of chemicals should be ensures. It ensures that the discharges meet the desired levels. This process of treating discharges is of high cost; hence some industries do not give it enough importance. Lack of education and motivation has rendered some industries unaware of some technological advancements that would help reduce toxic emis- sions while keeping the same rate of production. Although this phenomenon is of less impact in more advanced countries, it is still prevalent in 3rd world countries.

TYPES AND IMPACTS OF INDUSTRIAL POLLUTION

Water Pollution

Water pollution is one of the most common types of pollution caused by industries. Industries usually use one fourth of water withdrawals in a country. In some industrialized countries, 70% of water resources are used by industries. Most of the water is utilized to cool power plants. Hence, when this water is returned, it causes thermal pollution that damages marine and aquatic life and endangers the ecosystem’s health (Industrial Pollution, 2003). With the rapid industrializa- tion the world is witnessing, the volume of water needed for cooling industries is going to increase dramatically. Water pollution can also be caused by the dumping of toxic industrial wastes into waterbeds or the incorrect containment of waste, which will eventually leak into the groundwater and pollute all reserve water supplies.

The contamination of underground water with chemical pollutants leads to miscarriage, birth defects, premature infant death and low birth

weight. Industrial pollutant discharge into water resources can also cause various skin problem, eye irritation and neurological problems in adults and children. Even treated industrial discharges, upon reaching surface water, react with the present organic compounds to form cancerous elements.

Noise Pollution

Noise pollution can be described as unwanted sounds being hurled into the atmosphere to agitate unwilling ears. Noise pollution affects one’s psy- chological and physiological well being. Industrial clamor over a definite period of time is enough to gradually deafen a person. High levels of noise generations from factories are attributed to the lack of adequate acoustic measures to keep the noise within set limits (Noise Pollution, 2008). Many small scale industries avoid installing these noise- ambients because of the additional costs curtailed. The amount of noise coming from factories and power plants should be monitored and controlled. As the concentration of people in different cities and towns increase and industrialization grows, the predicament of unwanted noise is deemed to augment dramatically.

Air Pollution

Air pollution is yet another effect of improper function of the industry sector. It is when toxic chemicals and gasses are emitted into the atmo- sphere. Each industrial process presents a dif- ferent type of air pollution contribution. While petroleum refineries are mainly accountable for hydrocarbon and particulate pollution, steel and iron mills, chemical and cement plants all emit high concentrations of various other particulates (Air Pollution, 2008). Carbon dioxide, sulfur di- oxide, carbon monoxide, nitrogen oxide, ozone, particulate matter, among other forms of gasses, emitted by industries around the world contribute in the rising global temperature and in the stag- gering phenomenon of global warming.

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The first real step taken by the international community in regards of the environmental crisis was the Kyoto Protocol that was adopted in Kyoto, Japan, on 11 December 1997 but put into action on the 16th of February 2005. This protocol is an international agreement between 184 countries to set binding targets on 37 industrialized countries and the European community to take action to reduce greenhouse gas emissions. While the Kyoto Convention encouraged those industrial countries to reduce the GHG emissions, the Protocol forces them to do so (Kyoto Protocol, 2009).It states clearly that countries most responsible for the high levels of GHG in our atmosphere are, in fact, the developed countries. Under the principle “common but differentiated responsibilities” the Kyoto Protocol calls for pacing a heavier weight on developed nations since they have been on an increasing pace of industrial activity for over 150 years.

Under the Treaty, these countries have to meet their preset targets above all through national measures. The Kyoto Protocol, however, helps the countries meet these targets by suggesting the following three market-based mechanisms. The Kyoto mechanisms are: Emissions trading – also known as “the carbon market”, Clean development mechanism (CDM) and Joint implementation (JI). These mechanisms help decrease the emission of green house gasses in a cost effective way (Kyoto Protocol, 2009). The emission targets were to be monitored by the international community. The monitoring was to take place through Registry sys- tems that would track transactions by the different parties under the above-mentioned mechanisms. These transactions were later benchmarked against international transaction logs to verify that they are consistent with the Protocol’s rules. In addi- tion, the countries have to submit annual emission inventory reports (Kyoto Protocol, 2009).

With climate change being one of the most important topics in our world today, a summit

in Copenhagen was scheduled to discuss global warming and what different nations can do to stop the increase in Earth’s temperature. This conference brought together over 119 world leaders. The Copenhagen summit ended in a big disappointment (O’Connell, 2009). Richard Lambert, director-general of the CBI, described the climate-change meeting as a “missed op- portunity, and a disappointing conclusion to two years of negotiations”. The summit witnessed a compromise agreement brokered by the United States and China. The Copenhagen Accord, a non-binding pact, was not adopted by consensus at the summit in Denmark (Black, 2009). The Copenhagen Accord, states that it should be a goal to decrease earth temperature by 2 degrees Celsius (UN Climate Summit Ends With ‘work to do’ - Summary, 2009). It also promises to deliver 30 billion dollars as aid to developing countries between 2010-2012. Moreover, it promises to deliver 100 billion dollars by the year 2020 to help poor developing countries adjust to the staggering impacts of global warming.

ORIENTAL CASE STUDY: INDUSTRIAL ESTATE, THAILAND

One out of the 29 industrial estates in Thailand was developed back in 1989 through consistent governmental efforts and under the direct manage- ment of the Ministry of Industry. It is located over a 2,768-acre land. It began operation in 1990 and consists of over 117 industrial factories. These in- dustrial plants consist of 8 coal-fired power plants, 45 petrochemical factories, 2 oil refineries and 12 chemical fertilizer industries (Palmer & Grün, 2008). The area is surrounded by 25 communities, which are occupied by around 24,668 residents. These citizens have been directly affected by the continuous air pollution. The local school brought the most staggering case forward. Over 1,000

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students and staff members where rushed to the hospital after they proved to be suffering from severe headaches, nausea, breathing difficulties, and nasal after inhaling the toxics emitted by the industrial estate. In response, the Ministry of Education signed a lease to relocate the school 5 kilometers away from the first location, in 2005.

Tests have shown that the industrial estate emitted benzene, vinyl chloride and chloroform, which are cancerous toxic chemicals. These toxic emissions are widely known for their grave after- math, which include casing cancer, birth defect and other rigorous illnesses. The general safety standards for gas emissions were exceeded by 60 to 3000 times. Health assessments carried out on 2,177 residents, in June and August 2007, revealed that 329 of them had abnormally high levels of benzene. Moreover, the nitrogen dioxide and sulfur oxide levels were 200 to 500 times over the legally accepted standards per year. The industrial estate’s pollution was not limited to air pollution and toxic emissions but also included water resource con- tamination. The waterbeds located in the estate’s surroundings were found to be tainted with high concentrations of toxic metallic elements. Water samples retrieved from 25 public ponds in the area revealed that Cadmium was 6 times over the safety level standard, zinc 10 times, iron 151 times, lead 45 times, and manganese 34 times.

Villager’s Lawsuit against National Environmental Board (NEB)

27 villagers from 11 communities around that industrial estate filed a lawsuit. The villagers filed this law suit on the basis that the duties and responsibilities is had to uphold and did assign the area as a pollution control surrounding. “A pollution control area refers to an area devoid of toxic chemicals beyond the legal limits.” The court issued its verdict on the 3rd of March 2009. It established that the NEB had purposely breached

section 59 by disregarding the estate as a pollution control area. In its ruling, the court found that NEB was to declare the areas surrounding the Industrial Estate as pollution control areas and to clean up the contaminated industries within that region. The court had been presented with studies by the Pollution Control Department that revealed that the air in those areas contained a stipulating 49 volatile organic compounds, 20 of which are can- cerous. “19 of these carcinogenic compounds exist in amounts that violate the permitted standards up to 693 times”. More statistics where brought forth to the court that depicted that the number of leukemia patients was higher as opposed to other regions. The Business sector urged the govern- ment to appeal the court’s decision. Prominent businessmen claimed that future investments in the region would be highly affected if the area were announced to be a pollution control area. They asserted that this designation would highly affect both the tourism and food industry sectors of the district. The government went on with implemented the “green factory” project. This project encouraged the investors to spend more on technologically advanced industrial waste and emission treatments. The Ministry of Industry also put in an action plan to develop health units and labs in various local areas to test the water and air quality and make sure that they meet the set standards.

ENVIRONMENTAL ETHICS: LEBANON

Lebanon, which is very well known for its as- tounding water assets, fertile lands, and beautiful mountains, has been jeopardizing these resources for the last century. The constant pollution of our country by environmentally unethical business practices has lead to the endangering of life, human and animal, leaving an imbalance in our ecologi-

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cal system. The continuous dumping of toxic and factory wastes in the water has given rise to many ethical questions regarding the mass repercus- sions of these actions on the current generations and the coming ones. Apart from the water pol- lution, the pollution of the fertile Lebanese soil has also emerged. Using chemical fertilizers, the burial of several gallons of toxic wastes in addi- tion to many other actions taken negligently have also had a great aftermath on the Lebanese soil. Lebanon was known for engaging in international toxic waste trade and the holding of hazardous substances of more advanced countries such as Italy and Germany.

On November 14th, 1961 Article 6 of Regu- lation 1104 has forbidden disposing into the sea any kind of waste that could pollute the water and impact ocean life. Like all legislations that has passed after this date, it has not been enacted by the people, nor by the industrialists, nor by the government itself. The Lebanese beaches are waste dumps, and the ocean water is the new sewer. Successive wars and political instability in Lebanon has driven the focus of the people on other matters such as security and survival, and have hindered any awareness for the environment and for the importance of clean soil, water, and air. All projects that were started were put to an end when faced with the anarchy of the conflicts lived between 1982 and 1990. Projects such as the “Master Plan for Waste Water Management” and the “Master Plan for Solid-Wastes Management”, prepared by the Council for Development and Reconstruction and UNDP and WHO in 1980- 82, UNDP LEB/77/033 and WHO/BSM/00, have not yet been implemented 30 years after. New proposed projects by environmental organiza- tions and by successive ministers have all been rejected. Even air pollution, which is the most evident problem in the environment, is the least researched and reported. Until Today, the quality of the air in Lebanon continues to deteriorate; yet

no one claims responsibility for the protection of the atmosphere. In 1973, the National Council for Scientific Research initiated a program for the continuous observation of harmful substances in the atmosphere. Nonetheless, the plan was discon- tinued due to war and conflicts that have always been obstacles to real ecological and economical development

Pollution in Lebanon: History, Present, and Cases

Since the 1950s Lebanon has been through mul- tiple wars. Environmental damage an inevitable consequence of war. One of the major and long lasting scandals in toxic trade happened in 1987 when a European firm shipped and unloaded around 16000 barrels of hazardous waste in Leba- non, taking advantage of the state of chaos and paying the local militias an estimated amount of about 20 million dollars to allow and supervise the trade. This scandal was one of the events leading to the Basel convention in 1989, a treaty created to stop international waste trade. After pressure from environmental organizations and even ter- rorist organizations, The European industrialist promised to take back all the waste, which it claimed it did, only for Greenpeace to come and oppose that claim in 1994 with evidence of toxic barrels or substances still present in Lebanese soil and water. The returned ships had only taken the contents of 5500 barrels, and left the other 10000 to be burnt, used as raw materials, or buried in the Keserwan Mountains and shores posing an imminent threat of contamination of ground and water. Adding to that, Hundreds of barrels of paint from Canada, and chemicals from Europe were still being imported into Lebanon as late as 1996 despite the Basel treaty, which clearly prohibited trade of these kinds of substances. However, these imports were labeled raw materials in order to ap- pear in compliance with the Basel treaty, leaving

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Greenpeace as the sole whistle. The exact loca- tion of the solid toxic waste remains unknown to the public; while there have been many cases of unexplained poisoning and deaths in the mountain area. A Greenpeace report only states some of the locations, which are Ouyoun al Simen, and the Quarantina and Burj Hammoud dumps that are still there today.

More than 700 Dumps stand on Lebanese lands. Yet, on the coast of Beirut and Saida exist two of the largest dumps in Lebanon: the Saida garbage mountain and the Quarantina dump. The “Saida Mountain”, as it is being called, was created in 1975 as a temporary municipal dump point and has since then grown steadily to reach a volume of 21 million cubic feet with. It contains hundreds of thousands of tons of garbage, combining house- hold, hospital and factories waste with debris from the 1982 Israeli invasion. Doctors directly link the pollution from the mountain with cases of asthma, respiratory problems, insect bites, rodent infestations in the city and surrounding schools and hospitals. Sometimes students are sent home from school because of sickness and nausea. The mountain has repeatedly caught fire and at least three times partially collapsed into the sea, sending in the last collapse 150 tons of waste into the sea. Saida’s mayor states that marine life is inexistent throughout a radius of 500 meters. Not only that, but complaints have been also received from Syria, Cyprus and Turkey, protesting that garbage has reached their shores. On the other hand, The Quarantina waste lying at the entry of the capital is made of household waste and hazardous waste from hospitals and industries dumped there dur- ing the civil war, mixed with toxic ashes releases by the waste incinerator. It also includes some of the toxic waste barrels imported in 1987. The Quarantina dump was closed in the early 1990s. In 1997, Two Spanish and one Lebanese firm that were in charge of “rehabilitating” the dump were part of a scandal uncovered by Greenpeace

that involved them transporting the waste from the dump in Beirut to the Monte Verde area in Metn. Greenpeace then demanded them to take responsibility and fix their mistake.

In fact, Greenpeace played a critical role in putting pressure on the government and spread awareness about the disastrous environmental state of the country. However, regarding the issue of Italian waste import, they were subject to life threats and harassment, by officials who wanted to keep the issue away from public focus. In fact, some government officials were and are still playing a big role in the environmental disaster. Most of them have become experts in disguising waste disposals as not only raw material, but also real estate development projects. Developers are focusing more and more on dumping grounds, such as the Normandy landfill, the “shark canyon” in Beirut, and the Linor Project in Jounieh, where all studies show an unknown amount of toxic mate- rial in the ground now used to build hotels and apartments. These are dangerous practices, and the fact that these lots sell for the highest value in Lebanon is ironic. People aren’t fully aware of what’s happening.

In 1997, The Greenpeace activists called on the Association of Lebanese Industrialists to acknowledge that they form a primary reason of source nature pollution, to pay for the pollution they cause, and to take charge in cleaning up rivers and coasts. In fact, Toxic waste released by industries and by the production of electrical energy of thermo-electric power plants pollutes the atmosphere and the water. Lebanon knows a higher than average amount of Sulfur SO2 and Petroleum coke. Refineries and cement factories, especially in Chekka and Selaata, have been known for intoxicating both marine and human life. On one hand, industrial firms on the coast discharge their waste into the sea without any treatment. On the other, Inland factories discharge it into the nearest stream or burry it in deep boreholes,

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creating a risk of contamination of underground waters that people use in their households. The truth is that cutting costs is more important than the future of our land.

When Lebanon came out of the war under pressure to rehabilitate the country and get out of its deep economic struggle, industrialists quickly adopted a mindset of acquiring cheap technolo- gies from developed countries that are selling their old polluting equipment at bargain prices. This mindset dates back more than 50 years, as the Lebanese government has always encouraged the development of industry and the increase of exports, disregarding environmental results. All governments favored high-productivity concerns by passing fiscal, customs and commercial legis- lation. Yet, “no reference has ever been made on the impact of industry on the surroundings and on the protection of the environment, although industrial development affects the environment and other sectors”, states a national report on the environment and development in 1991. Even laws that already exist has been updated and helped increase the pollution. As an example, in 2001, a law was passed enabling factories to omit the double of a previously allowed level of chemicals. The environmental code was one of the few tries from the government’s side to scope the pollution issue. After 5 years of being referred to the par- liament, the environmental code has introduced new rules such as the obligation of Developers to conduct an environmental impact assessment a scientific study that clearly states a new proj- ect’s impacts on the surrounding environment. Moreover, fines for polluting the environment with hazardous waste were increased from LL10 million to LL100 million. In Addition, incentives, reaching 50 percent tax reductions, were offered for businesses using environmentally friendly methods. However, a big question mark remains on the implementation of these rules. For more than 50 years, the Lebanese Chemical Company in Selaata has been dumping the acidic waste from its phosphate fertilizer production. Greenpeace

studies on the Selaata coast revealed a level of hazardous harmful material exceeding the amount allowed by law. Furthermore, activists are still releasing articles, last one on May 25th in a lo- cal newspaper, opposing the abuse lasting years of cement factories in Chekka, where the level of petroleum coke on the shores is alarming, and even claiming a government conspiracy to scare citizens out of the city and transform it into an industrial area.

The Ecological Consequence of the 2006 War on Lebanon

Lebanon’s latest war in 2006, along with its abominable humanitarian damage, has made of the environment an additional casualty of war. The main environmental event was the bombing, one 13 and 15 July of storage tanks at the thermal power station in Jiyyeh, 30 km to the south of Beirut, by an Israeli air strike, releasing between 15,000 and 30,000 tons of heavy fuel oil into the sea. The spill spread along the whole Lebanese coast, and even neighboring country Syria, causing an ecological tragedy and a grave endangering of marine species. After numerous campaigns, the massive spill pollution has been treated, but only visibly, since underneath the surface in the deeps of the sea still lies heavy fuel oil that sank quickly, that is hazardous to fish and sea plants. Ironically, this massive quantity of hydrocarbon present in the sea is said, by the UN after-war assessment report, to be “normal “and “expected” in that part of the already polluted Mediterranean. As for the atmospheric impact of the strike, the fire was left burning for 27 days. The smoke would have contained a potentially toxic cocktail of pollutants of which carbon monoxide, methane and hydrocarbons, potentially causing respiratory problems for local residents.

The war has also left a variety of hazardous substances, unexploded cluster bombs, tremen- dous war-debris quantities, toxic ash and leaked chemicals from bombed factories. “The sheer scale

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of the debris is overwhelming existing municipal dump sites and waste management regimes”, claimed a report by UNEP experts who carried out an after-war in-depth field study. A chronic problem had just worsened. Lebanon did not have a proper infrastructure for waste treatment, and especially for the war waste. Estimating the rub- bish at about 3 million square meters, Lebanon and UNEP still have yet to find a solution for treatment. The only proposed solutions, still under study three years later, are the cheapest ones. Ei- ther crush the rubbish and reuse it as construction material, or dump them in old already polluted quarries. Awaiting a plan, and under pressure of reconstruction and returning people to their homes, the waste has been temporarily thrown in a chaotic way in hundreds of places, rivers, forest, hills, and road sides. The Ouzai dump, right on the shore of Beirut, has just grown a million square meters of construction, chemical and electronic material destroyed in the attacks.

Post-War and Current State of the Environment

The Lebanese government currently loses 550 mil- lion dollars due to Pollution. The new government has concrete plans to help the ecosystem. For the first time, he announces the raise of fund for the environment. However, the facts show that this is a prolonged process; there is a lot to be done. The current state of the environment is a disaster:

• There are a total of 700 municipal and na- tional dumps in Lebanon, said the UNEP after-war report. Solid waste management is a primary concern.

• Garbage collection company operates sole- ly in Beirut & Mount Lebanon. Throughout the rest of the country, waste is still burned or dumped in random quarries, in the sea, or in nearby streams without treatment.

SOLUTIONS AND RECOMMENDATIONS

First, the most critical first step into the envi- ronmental problem is research and information. Studies need to be done throughout the country. This can be done with the help of UNEP and Greenpeace that have already done some studies. These should be pushed forward and multiplied. They also should be available to the public, and talked about in the media. Then, these researches will provide a basis for the integration of envi- ronmental studies in the education system. From their childhood, people should know their ethi- cal responsibility towards the environment, and develop values that will guide them through their life. In order to respect the environment, one must know its importance. That can be taught in science courses and repeated through the whole education process. There should be specific reports and cases to teach the impact and show the threat of pollution. Study guides and courses should be developed to include all kinds of pollution (air, marine, soil).

Moreover, these researches will push for institu- tional policies and provide information to develop new legislation. Ecological integrity is neces- sary in the formation of laws and policies. There should be strict penalties for polluting factories, regulations on imported goods and a ban of all non-recyclable material. Once legislation is there, law enforcement comes next. While some laws already aim to stop pollution, their enforcement is the biggest problem. State scientists should be assigned to monitor all factories continuously, and sent to perform ground and water studies next to “suspected” industrialists, who might not be even aware of the bad consequences of their activities.

Considering some cases like the toxic waste and some anti-environmental practices by some corporations and people that are close to govern- ment, we can note political corruption as a primary

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reason of environmental harm. Many believe that all these problems can go away if the government makes a decision to put environmental as a prior- ity. However, that would require inter-ministerial work between the ministry of the environment and the ministry of internal affairs.

As for practical solutions, they are waste management and sewage organization. Experts should develop plans so that none of the waste or the polluted water manages to reach rivers and the ocean without proper treatment. Factories should have their own plants for recycling and treating their waste. In addition, the solution to the household waste problem can be the imple- mentation of separation at source and recycling plan. As for industrialists and hospitals dealing with toxic material, their waste should be decon- taminated before recycling. They should replace their technologies with ones that do not generate toxic waste, and develop non-polluting production processes. Incinerators and landfills of hazardous waste must be banned.

FUTURE TRENDS

Due to the importance of safely disposing of toxic and harmful waste, institutions that generate hazardous materials (industrial plants, hospitals, agricultural plants, households etc…) must be compelled and encouraged to follow the relevant procedures that guarantee safe and clean disposal. The model of the construction waste disposal charging fee (WDCF) with a system dynamics approach shows major factors and their dynamic feedback loops. An appropriate WDCF can be effectively determined by using the model, which enhances construction waste minimization (Yuan and Wang, 2014).

For managing medical wastes, hospital ad- ministrators must be held liable for “the medical wastes until they are not considered as hazardous or infectious”. Managing medical waste includes “negotiating with a medical waste disposal com-

pany, on-site treatment of medical waste, and compliance with waste regulations”. Moreover, steps to ensure proper disposal of medical waste in the future include:

1. Encouraging companies as well as house- holds generating toxic waste to separate their garbage.

2. Planning for the development of hazardous waste confinement centers.

3. Introducing a new waste management law (Kastelein, 2004).

And finally, Cheong et al. (2007) suggested that in the toxic waste disposal plants context, any change in the process of waste disposal must be closely monitored in order to limit the health hazard exposure to factory workers.

CONCLUSION

Greenpeace and NGOs are needed and we want them to be heard. Instead of neglecting them, politicians and leaders need to be a benefit for these kinds of organizations, and should finance their activities in order to promote the awakening of environmental awareness. The people need to learn that the future of the country and their children depends on the state of the environment. Their lives depend on the healthy soil of the good earth, and on the quality of waters. If it is not a direct threat to them, they should be aware that the products they use come from different factories that might be engaged in unethical practices, cutting costs band yet strategically hurting themselves and compromising the quality of their products.

REFERENCES

AFP. (2009, December 5). Pollution costs Lebanon 500 million dollars a year. Beirut: AFP.

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Air Pollution. (2008). The Columbia encyclopedia (6th ed.). Columbia.

Al-Azar, M. S. (2002, July 25). Environment code launched after 5-year parliamentary sojourn. The Daily Star.

Anid, C. S. (2009, September 21). Solid waste management in Lebanon: A dead end. Retrieved from http://www.iloubnan.info

Black, R.S. (2009, December 20). China and Indonesia welcome Copenhagen summit deal. BBC News.

Captan, L. S. (2001, June 12). Environmental activists are fighting against all the odds. The Daily Star.

Carson, R. S. (2002). Silent Spring: 1962. Boston, MA: Mariner.

Cheong, H. S., Kim, E. S., Choi, J. S., Choi, S. S., Suh, J. S., Choi, D. S., & Kim, J. S. (2007). Grand rounds: An outbreak of toxic hepatitis among industrial waste disposal workers. M.S. Lebanon Housing Built on Toxic Waste Sites.

Dobson, A. P., Bradshaw, A. D., & Baker, A. Á. (1997). Hopes for the future: Restoration ecology and conservation biology. Science, 277(5325), 515–522. doi:10.1126/science.277.5325.515

Earth Times. (2009, December 19). UN climate summit ends with ‘work to do’ - Summary. Earth Times.

Ferdowsi, A. S., Ferdosi, M. S., & Mehrani, M. S. (2010). Incineration or autoclave? A comparative study in Isfahan hospitals waste management system. Materia Socio Medica, 25(1), 48–51. doi:10.5455/msm.2013.25.48-51 PMID:23678340

Greengard, S. S. (2010). Tracking garbage. Communications of the ACM, 53(3), 19–20. doi:10.1145/1666420.1666429

Greenpeace Press Release. (1995, May 11). Italian toxic waste still lies dumped in Lebanon. Larnaca, Cyprus: Author.

Greenpeace Press Release. (2009, September 2). Firms evading responsibility of Lebanese waste dump scandal. Beirut: Author.

Industrial Pollution. (2003). Department of Ecol- ogy and the Environment.

Kastelein, B. S. (2004). Toxic disposal dilemma. Academic Press.

Kyoto Protocol. (2009). UNFCCC.

Lerner, M. S. (2011). Cash for clunkers, dimes for duracells: An effective model to motivate the proper disposal of household toxic waste. Jurimet- rics: The Journal of Law. Science & Technology, 51(2), 141–179.

Mae Moh Power Plant, Lampang. (2009). Case study. UNESCO Bangkok.

Masri, R. S. (1995). The human impact on the en- vironment in Lebanon. International Relief Fund.

Moussaoui, R. S. (2009, October 8). Sidon chokes under rubbish dump. AFP. Retrieved from http:// www.iloubnan.info

Noise Pollution. (2008). Student’s Guide.

O’Connell, D.S. (2009, December 20). Article. Times Online.

Palmer, C. S., & Grün, M. S. (2008, January 3). Environmental ethics. In Stanford encyclopedia of philosophy. Palo Alto, CA: Stanford University Press.

Solomon, C. S. (2013). Legalities of waste stream management. Health Facilities Management, 26(8), 31–31. PMID:24069705

Toxic Waste. (2013). Columbia encyclopedia (6th ed.). Columbia.

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United Nations Environment Programme. (2007, January). Lebanon post-conflict environmental assessment. Author.

Yuan, H. S., & Wang, J. S. (2014). A system dy- namics model for determining the waste disposal charging fee in construction. European Journal of Operational Research, 237(3), 988–996. doi:10.1016/j.ejor.2014.02.034

KEY TERMS AND DEFINITIONS

Green House Gas: Industrial and transporta- tion emissions rising in the atmosphere forming a

light refraction layer allowing solar light to enter into the atmosphere and preventing it partially from escaping thus producing an overheating effect in the planet’s atmosphere.

Greenpeace: An international NGO associa- tion that monitors and investigates incidents that contributes to environmental degradation and to ecologic disequilibrium.

Hazard: Danger that results from a specific activity with uncertain consequences.

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Chapter 15

DOI: 10.4018/978-1-4666-7254-3.ch015

Advertising Deceit: Manipulation of Information, False

Advertising, and Promotion

ABSTRACT

Deceptive advertising denotes a producer’s usage of mystifying, deceiving, or blatantly untrue statements when endorsing a product. There are several illegal methods for attempting to deceive consumers. This can be done through concealed fees or the usage of surcharges. Deceptive advertising can also take place when “going out of business sales” charge consumers more for products that had already been marked down. Advertising law identifies the manipulation of standards as dishonesty under customer law. Undefined terminology is also considered a violation under consumer law. Marketing deceit is a practice that can equate to a crime. Thus, a marketer should not get involved in deceiving their potential customers for this manipulation would lead to various harms: it erodes one’s self-confidence and hinders the development of responsible advertising. Big companies make big mistakes, this is to say that trust associated with big companies holds severe uncertainties. This chapter explores advertising deceit.

INTRODUCTION

Advertising is a kind of communication envi- sioned to convince an audience to either buy or take another action towards products, services, or ideas. The power of advertising in persuading the general public to buy or benefit from products and services is undeniable. In fact, concentrated ads that specifically cater to certain segments of the market have a powerful effect on the constituents of these segments as they play on their most par- ticular needs, wants, and fears. In fact, advertising

has become so powerful that it is able to influence consumers into purchasing goods and services that they might not purchase otherwise. This is why false advertising (also known as deceptive advertising or deceitful advertising) is particularly dangerous. In very simple terms, false advertising is the act of using false or misleading statements. More precisely, the U.S’ Lanham Act of 1946 unmistakably states that false advertising is “any advertising or promotion that misrepresents the nature, characteristics, qualities or geographic origin of goods, services or commercial activities.”

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BACKGROUND

Advertising is a kind of communication envi- sioned to convince an audience to either buy or take another action towards products, services, or ideas. These messages are regularly paid for by sponsors and viewed via diverse media.

Nonprofit organizations may rely on free modes of persuasion, such as a public service announcement. To be perceived, understood and memorized, advertising has generally a very little time. It should simultaneously collect the attention, retain it and transmit its message. In that matter, advertising could be classified in the category of techniques of mental manipulation. This technique aims via messages to reach the result.

Deceptive advertising denotes a producer’s usage of mystifying, deceiving, or blatantly untrue statements when endorsing a product. The law of advertising will protect customers from decep- tive advertising by enforcing specific legislation. Advertising law and consumer law both promote truth in labeling.

A company will charge extra fees beyond the advertised price for a certain product or service.

Companies going out of business may charge customers higher prices. According to consumer law, this is very unfair because it deceives the consumer and takes advantage of him.

Terms that are not defined properly may lead to false advertising because they may contain vague meanings that customers do not comprehend.

CURRENT RESEARCH

Deceptive advertising can take on many forms. An example of that is visual puffery. The Federal Trade Commission (FTC) defines visual puffery as “term frequently used to denote the exaggera- tions reasonably to be expected of a seller as to the degree of quality of his product, the truth or

falsity of which cannot be precisely determined,” (Fetscherin and Toncar, 2009). A study authored by Marc Fetscherin and Mark Toncar and pub- lished in 2009 sought to investigate the presence and effects of puffery in advertisements about women’s fragrances. The final results of the re- search showed that “… visual puffery does exist, and can generate expectations that in many cases exceed actual product evaluations” (Fetscherin and Toncar, 2009). Other studies have shown that the mental state of consumers has a severe effect on their susceptibility to false advertising. In fact, one study conducted by Kathryn and Michael LaTour reveals that consumers who are in a good mood are more likely to identify false advertisement. What’s really surprising, however, is that these people are also more likely to develop positive feelings towards the brand that’s being falsely advertised (LaTour and LaTour, 2009).

After having established that consumers’ moods affect their susceptibility to false advertis- ing, marketing and behavioral researchers began exploring the neural processes that take place when consumers are exposed to deceptive ads. Along those lines, Craig et al (2012) collected neuroimaging data of participants while they were exposed to three types of advertising: believable advertisements, moderately deceptive advertise- ments, and highly deceptive advertisements (Craig et al, 2012). The results showed that there is greater brain activity associated with viewing advertise- ments that were moderately deceptive than there was activity when the consumers were subjected to ads that were either believable or highly decep- tive. These findings suggest that consumers are more attentive to ads that are moderately decep- tive and are thus more inclined to believe them. (Craig et al, 2012).

While exploring the effects of deceitful adver- tising, Quiang Yan (2012) states that “false adver- tising not only undermines consumers’ interests, it may also generate negative spill-over effects on

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competing firms and the society” (Quiang Yan, 2012). In this article, the author argues that this negative spill-over is due to externalities that are caused by false externalities. The author defines the term “externalities” as results that are not intended by neither parts involved in advertising activities and the value of which are not incorporated in any direct outcome related with advertising. In some senses, we may perceive externalities as side-products of advertising. Externalities can be positive, which means bring positive values to the third party beyond ads; and they can be negative which means losses to the third part” (Quiang, 2012).

Given the grave consequences of false advertis- ing, stringent legal measures have been put into place in order to limit and reprimand its usage. The Lanham Act, mentioned above, is a shining example of such measures. According to the Act, “any person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading descrip- tion of fact, or false or misleading representation of fact, which in commercial advertising or pro- motion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person’s goods, services, or commercial activities, shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act.” (Balough, 2012). Furthermore, the act specifies that to establish that false advertising has actually taken place, a plaintiff must provide evidence to the following:

1. The defendant made a false or misleading description of fact or representation of fact in a commercial advertisement about his own or another’s product.

2. The misrepresentation is material, in that it is likely to influence the purchasing decision.

3. The misrepresentation actually deceives or has the tendency to deceive a substantial segment of its audience.

4. The defendant placed the false or misleading statement in interstate commerce.

5. The plaintiff has been or is likely to be injured as a result of the misrepresentation, either by direct diversion of sales or by a lessen- ing of goodwill associated with its products (Balough, 2012).

ISSUE DESCRIPTION

Deception is a major relational transgression that frequently directs to feelings of betrayal and distrust between partners. It violates rules that are in relation with each other and may sometimes cause in a breakage of this relational base. It is considered to be a negative violation of expecta- tions. Most of us anticipate that friendship parties be truthful most of the time. Even talking and communicating would require an all-of-the-time judge to tell whether what is being communicated is based on truth or not, though, not even a judge can have the capability to know of whether what is being communicated is truthful, i.e. honest or not and this means deceitful. “A significant amount of deception occurs between romantic and relational partners. Though commonly used and allowed by the ethical guidelines of the American Psychological Association, there has been debate about whether or not the use of deception should be permitted in psychological research experiments” (Dresser, 1981). Accord- ing to Dresser (1981) “researchers are only to use subjects in an experiment after the subject has given informed consent. However, because of its very nature, a researcher conducting a deception experiment cannot reveal its true purpose to the subject, thereby making any consent given by a subject misinformed”. Baumrind (1964), criticizes

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the usage of dishonesty in the Milgram (1963) obedience experiment and contends that decep- tion experiments unsuitably take advantage of the conviction and compliance given by the subject when volunteered to participate.

Deception covers different types of communi- cations that aids at distorting or omitting the whole truth. More than 50% of deception takes the form of lies, around 30% take the form of concealments, and the 20% left vary among the other forms of deception. Honesty is a vital characteristic, and many people cherish it and likes to believe that it still exists nowadays. Dishonesty, however, seems to be found every day, even in people that are supposed to lead societies.

Many practices are deemed to be unethical, moving to the specific, some marketing practices are considered deceptive. Marketing practices are considered deceptive when consumers think that they are obtaining greater value than they actually are. The deception might take different forms like false pricing, omitting vital information, mislabel- ing of packages, and selling damaged products.

General Practice of Deceit

It is understandable why companies tend to send deceitful messages through their marketing sometimes. They have a brand image to keep, and customers to attract, to maximize sales and reach the profit margins. But based on previous experience there will always be negative conse- quences – once the word gets out, the media can ruin the business. This applies to one MNC in UK – when they claimed in that 80% of the dentists recommend their toothpaste, and then one of their competitors claimed that the same percentage of dentists interviewed suggested their distinguished product, implying that the MNC had lied.

Furthermore, every time we visit a fast food bar and order a burger that does not look half as good as the juicy one we see in the advertise- ment, or even half the size. Marketing practices

are deceptive when the customer receives a lower value from a product or service than the value he/she was expecting. Deception can happen in any element of the marketing mix. However, because consumers are now being exposed to a great number of products and a lot of information, they became skeptical of the marketing claims and the messages they receive rather than passive receivers, and try to protect themselves from being deceived. Thus, when a product or service does not provide expected value, customers will try to find a different source.

When it comes to the low prices setting and promotions, customers tend to believe they are paying for a value less than it actually cost, when in reality, they are getting either a poor quality or expiring products. Among the most frequent complaints are ones about products that are unsafe, that are of poor quality in construction or content, that do not contain what is promoted, or that go out of style. Marketing can cause materialism. It is well known that consumers’ purchases reflect their identity and is affected by their personality and who they are and what they see themselves as. Children are considered to be the most important target of advertising since they are believed to influence the household shopping.

Advertising needs regulations to minimize the effects that deception can have in society. Adver- tising is regulated by the authority of the Federal Trade Commission to forbid any dishonest biased and deceptive behavior.

CALIFORNIA ADVERTISING REGULATION: HISTORY OF THE UCL

California Civil Code § 3369, enacted in 1872, was California’s early unfair competition statute. It “addressed only the availability of civil remedies for business violations in cases of penalty, forfei- ture, and criminal violation.” A 1933 amendment

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expanded the law to prohibit “any person [from] performing an act of unfair competition.” This amendment did not, however, extend UCL protec- tion to consumers. This limitation was in response to the U.S. Supreme Court’s 1931 decision in FTC/ Ramada. In Raladam, the Court held that a FTC Act Section 5 violation must show actual injury to competition. This ruling prevented individual consumers from suing under the FTC Act. Fol- lowing this rationale, California applied the UCL to unfair business practices that affected business competitors, not consumers.

In 1935, consumers, not just business com- petitors, were given the opportunity to sue under the UCL. The Supreme Court of California clarified the statute in American Philatelic Soc. v. Claibourne, stating that “the rules of unfair competition” should protect the public from “fraud and deceit.” In 1962, a California appellate court reiterated this rule by stating that the UCL extended “equitable relief to situations beyond the scope of purely business competition.”In 1977, the legislature moved the UCL to the California Business and Professions Code § 17200. In 2004, California voters enacted Proposition 64, which limited UCL standing to individuals who suffered financial/property loss because of an unfair busi- ness practice.

BACKGROUND IN LEBANON

Marketing deceit is a very common issue in Leba- non. The simplest example would be the clothing store in the neighborhood of almost everyone that advertises an 80% discount on ALL items. But once you enter this store, of course most of the items will have a 20-30 percent discount and some would be the new collection that doesn’t include any discount at all. Everywhere in the world and in Lebanon specifically, marketing deceit is con- sidered to be tactical marketing, a “clever” way for

businesses to increase their revenues. This might be considered a clever idea but what businesses don’t know is that customers are feeling that they have been betrayed and treated as idiots. Once a customer discovers their intentions, he or she will no longer be a customer. Such an act will cause the company to lose a lot of potential customers. The issue of deceit in itself is extremely unethical and unacceptable no matter what the circumstances are. To be more precise, marketing deceit is even more unethical and its results are severe since they reflect on the company’s profitability and reputation. Once a company loses its reputation due to false advertising, not a single person would ever take the company’s ads or products seriously.

In Lebanon, people consider marketing deceit an issue that is practiced by all businesses in order to increase their revenues. It has been happening in Lebanon ever since the concept of marketing evolved. People got used to such an unethical act and no one ever tries to do something in order to stop it. This should not be acceptable because consumers have the right to revolt and ask for honest and ethical advertisements. There are a lot of laws in Lebanon that are present to protect consumers and their rights. But the problem is that consumers do not act in response to market- ing deceit since they are brought up to believe that ads are nothing but a means for a company to make more profit and that they are never true.

One example that happens frequently in Leba- non is that of Burger King. Every now and then, this fast food chain restaurant decides to have a promotion. So people will find ads all over the place claiming that Burger King is offering with every meal that consists of a burger, fries and a coke, another burger for free. And the picture on the ad shows a huge double burger. But, when a customer decides to buy from this restaurant, he or she will find that the ad was nothing more than a lie in order to bring in more customers. That is because the burger you will be buying and the

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one you will get for free are mini-burgers that are normally served in kids meals. So the customer would have paid in this promotion more than he would have paid normally and remained hungry!

One of the major issues that Lebanon has been facing, and continues to struggle with, is the abysmal low internet speed connection. The Ministry of Telecommunications promises to work on this issue repeatedly but to no avail, and in comparison to other countries, Lebanon ranks in the last five for its internet connection which of course affects most sectors in Lebanon, business, economical and social.

The Lebanese Internet connection is ranked among the slowest in the world (168 out of 170). The government only recently agreed to release needed bandwidth for a faster internet connection, something that Lebanese internet users were look- ing forward to for some time now. The campaign began in August 2011. It clearly stipulated, and promised the Lebanese citizens, that the “Load- ing” days will be missed, and they will enjoy a faster internet than the one they have had for many years now. This campaign has been followed by several other campaigns created by Lebanese youth, mostly bloggers and avid social media users, aiming to put pressure on the government to get more information about the promises they are giving, one of these campaigns was Ontornet with its slogan (Trans. “Because I want internet… Not wait-net”), a campaign demanding a decent and affordable internet service in Lebanon.

As part of the Marketing campaign to answer the questions of Lebanese internet users, the Telecoms Minister has promised in a number of his press conferences, that there will be no more delays and that the service will improve “in the coming weeks”. The internet connection does not only include home internet, but it also covers the broadband access to consumers on their cell phones via 3G that was introduced a decade ago in other countries.

The minister promised to continue what his predecessor has been working on, insisting on how

the new third generation connection will change the telecom’s face, something that the Lebanese citizens have heard before. “Lebanon was outside the knowledge economy,” the previous Minister of Telecom said in 2007 during the launch of services at that time, “Now it enters through the front door.” And yet, the Lebanese internet con- nection is still twice as slower as the connection in countries like Tanzania and Zambia, where the GDP per capita are one tenth that of Lebanon.

Furthermore, officials in the Ministry con- tinue to fervently claim that Lebanon will be on a par with international standards regarding the internet connection, at the time where, even if the speed was quadrupled, the web community in this country will still lag behind regional competitors like Jordan and Qatar. Not to mention the fact that if placed in comparison to other countries, the limited Lebanese bandwidth cap that is 3GB per month is incredibly behind that of the United States’ caps which reaches 250 GB per month, and Australia’s bandwidth cap 200 GB, which has been criticized by a popular site as belonging to the “stone age”.

On top of all this, former minister has proudly stated that the new speed that the ministry is trying to establish, would reach up-to 20mbps on the 3G network -“up to” being a key qualifier- although 3G has become an old generation for many countries as they have shifted to the fourth generation (4G). Despite inquisitions on why the many promises that have been made have not come to any actual effect has been asked constantly of the individuals attached to the current administration (who have held the ministry for the past three years), or even those who held the ministry three years prior to that, no answers have been provided. But being in Lebanon seems to make it legitimate that all issues not related in any way to any political or religious affiliations, and that people desperately need, are in fact neglected and not taken seriously for political reasons.

The promises that have been made and the marketing and advertising campaign that has been

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done had citizens’ hopes up, especially after the Minister’s press conferences; however, it turned out to be only a method for the administration to market themselves as a working government, because each press conference claiming that the internet will be faster, and that work is being done to achieve this promise, was followed by another conference apologizing for “technical” problems faced which will, naturally, delay the launch for a couple of more weeks.

The question remains then, how ethical is it, in country that claims and tries to show a picture of development and civilization to the world, to have this marketing campaign ending up with a failure to deliver what a whole population has been promised. In this case, it is not a small private company that had an actual “technical” problem, or tried to deceive its customers to gain more profits. It is a government that is failing to deliver the basic rights for people in this country, after promising them that the connection will finally meet their expectations.

Today in Lebanon: False Advertising

• Is some advertisers’ sole purpose to copy other countries’ advertisements? Do made- in “anywhere else” advertisements really suit Lebanon?

Lebanon is unique and they try to speak to the target market in a “language” they will comprehend and relate to. There is a lot of creativity in Lebanon.

• What’s with schizophrenic censorship?

What is the point of hiding anything when magazines do not hide everything? People in Lebanon are bombarded with visual pollution that they will not really be affected by one thing that they see.

• Why don’t companies put their employees in the loop?

Employees of certain companies are surprised to see their companies’ ads for the first time, just like anyone else.

LOCATION, LOCATION, LOCATION!

Lebanon has become an advertising jungle. Most advertisements fail to be placed in the right places.

Impact of Advertising

Lebanon Advertising: A One Way Street

• Lebanon’s billboards are known to be one of a kind. They are very loud, demanding attention.

• Lebanon’s advertising companies are be- lieved to have the freedom to advertise al- most anything.

• The ad about exotica on mother’s day took Lebanon and the social media by storm one day. Exotica made people angry, matching big noses of mother and daughter along with protruding ears of another mother and daughter was too much to handle. All blog- gers spoke and it wasn’t long before the ad was changed.

Lebanese Case of Deceptive Advertisement

In July 2009, a customer starting using green tea and weight loss products from Diet business, a well-known line of herbal treatments in Lebanon. He had seen the ad on T.V.

He was supposed to use these products for forty days but by the second week, he had trouble urinating and got a high fever which hospitalized him. Due to this, the parliament passed a law which only allows pharmacists to make and sell herbal products and forbids any ads of herbals unless approved by the Ministry of Health.

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Current Resolution

Nowadays, advertising must adapt to a globalized economy. It, therefore, had to develop networks with the four corners of the planet to meet all their needs. Moreover, different groups are essential and they diversify their activities. For this reason, advertising adopts niche strategies in which it assimilates a specific jargon to each target. But is this advertising really informs the consumer or it just manipulates him to get to its objective?

The advertising jargon does not seek any more to sell the product as it is, but bases itself on the values, the state of mind in which the viewer must see himself. Under information which publicity provides in its various jargons, it tries to be in- formative, suggestive. But rather to try to deduce a hidden facet; it is at the first manipulative. Illu- sionist, magician by its words it imposes a charm on the consumers through implied persuasion.

Advertising is usually known by its openness to all civilizations. But nevertheless, has a hidden face. It is the charmer mask of the economy of the market. It hides its face by hiding behind its mask; the veil of persuasion. She never says “buy this product.” But it gleams the perfection or the assets of the products and deceives the consumers whom we can reach only by buying, which it is the unique & only objective. It incarnates several forms, but it always returns to the most effective form which is: persuasion. Besides it is the most intelligent form in the industrial strategies, car- ried out of a very rich and convincing jargon. It creates among consumers a kind of latent desire that grows through its lexical magnetism.

Baby Milk Ads Are Not to Be Messed With

Assembly adopted Resolution WHA34.22 which includes the International Code of Marketing

of Breast-milk Substitutes”. The Code covers marketing issues where infant formulas are seen to be appropriate in replacing breast milk. Such ads are banned and health workers are given the responsibility for advising parents. Nestlé agreed to implement this code in 1984 after they met with the boycott coordinators. Nestlé stated in an anti-boycott advertisement that it promotes infant formula “ethically and responsibly”. But Nestlé could not support this claim since the boycotts provided evidences against it. Nestlé’s case was getting severe as its products were banned from the shops and vending machines of many European universities, colleges, and schools. Breastfeeding is free and safe, it protects against infection, but companies know that unless they get babies on the bottle, they don’t do business. Thus, to what extent does the food business comply with the message that its entire formula product carry out, “Important notice: Breast milk is best for babies. Before you decide to use an infant formula consult your doctor or clinic for advice”?

Opinion

The general ethical defense of marketing deceit reflects both utilitarian and Kantian ethical stan- dards. Marketing provides information for market exchanges and therefore contributes to market efficiency and to overall happiness. Advertising information also helps consumers make deci- sions regarding their purchases. What if it was the Nestlé case that deceived African mothers or the internet marketing campaign in Lebanon that manipulated its target participants? Would this still be considered true and accurate information marketing? From the baby food case mentioned above, companies might not think of it as a severe act; instead they might consider it to be a faster way to generate more profit. Of course they know the consequences of their unethical act, but they

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are trying to neglect it and ignore it by thinking of their own benefit and their own satisfaction. From the utilitarian perspective, marketing deceit is unacceptable since its consequences are not providing the maximum good for the maximum number of people. It is only providing satisfaction for the company’s executives; while the people, who are the majority, are suffering. Thus, business transaction did not provide actual as proposed to merely apparent benefits. Therefore, companies should think about increasing their profit in an ethical way while promoting their products and their goodwill benefits. Marketing deceit should not be present on the agenda of any marketing manager or any director or executive of any com- pany; no matter how insignificant and harmful the deceit is considered. According to the Kantian ethical tradition, Nestlé failed to a great extent to ensure that its customers are respected as free and autonomous agents, rather, it treated them simply as means to the end of making a sale. Manipula- tion in this case is a clear example of disrespect for persons since it bypasses their own rational decision making and like any other similar cases, marketing deceit goes against human rights and ignores all moral principles.

Marketing deceit also goes against these rights in other life dimensions. As the use of marketing and advertising increases with the increase of the media and especially social media, the marketing deceit phenomena is expected to dramatically raise simultaneously. The Lebanese internet case was one of the big marketing campaigns that ended with the disappointment of the Lebanese internet users and community. With the development and improvement of the internet connection and band- width around the world, the minimum one should expect is a basic connection service similar to the one offered around the world. What we are expe- riencing now in Lebanon, is a slow connection.

Regardless of the probability that false prom- ises might have been the result of a technical mis- understanding, or a technical issue that prevented

them from delivering their promises, the results were not satisfactory. Some people have had enough. Others may say that something should be done, at least so we could make sure that whenever we are promised something, we will eventually get it, and especially when it is with similar issues that are tangible and that are neither politically nor religiously affiliated, and that should not be, these are services that all Lebanese people will be benefiting from.

They say we are lost till we learn how to ask; obviously some communities (ontornet) tried to ask, but still, that was not enough. I think we need to start going more into the legal side of things, and start questioning our government. It is quite a hard thing to do in our country where everyone’s acts are covered and protected, but when it started to get a bit Kantian, with one small problem: even the means are not achieved, something bigger must be done. People are supporting the unethical acts and fake promises by not acting and questioning, and this internet case is one additional story on the shelve of the reasons why we should start to be more active and involved in getting our rights and what we have been promised to get.

Normative Resolution

Lebanon has achieved a lot in the advertising and marketing sector. Despite great improvement, this country still lacks laws, rules, or regulations to follow - except the rule in which agencies and com- panies should not name their competitor during their advertisement. Lebanon has achieved a good reputation as a leader of the regional advertising market over the past few years.

Lebanon’s advertising companies are positive about the future of advertising. They hope that, if the situation in Lebanon remains stable, advertis- ing will hit back strongly. They have recovered well after the 2006 war and hope to continue thinking optimistically.

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LESSONS LEARNED

Many lessons can be derived out of the two cases discussed previously. First, marketing deceit is a practice that can equate to a crime. Thus, a marketer should not get involved in deceiving their potential customers for this manipulation would lead to various harms; it erodes one’s self-confidence and hinders the development of responsible choice among those manipulated, it treats them as means to the marketer’s own end and as an object to be used rather than as an au- tonomous person in his or her own right. Second, big companies do make big mistakes; this is to say that trust associated with big reputed companies holds severe uncertainties with it, so those who are concerned need to be careful from falling in the trap because in general, most manipulation is done to further the manipulator’s own ends at the expense of the manipulated. However, the big company also gets harmed by the lasting bad reputation it gets to hold. When it comes to the baby food case, marketing deceit gets severe that it risks the lives of new born babies. Thus, to what extent is business practice ethical? To what extent is this consequence tolerated? What decision would justify the death of thousands of babies?

Ultimately, no decision. Speaking specifi- cally about fake internet connection promises and manipulations by the Lebanese government would sound a bit redundant, for no other reason than that it is being a sound in the wilderness. From this case, we have learnt to, “let every eye negotiate for itself and trust no agent”, because despite what the reasons are, even the government (represented by the minister of telecommunica- tions) violates consumers rights with fake and misleading promises. Marketing is an essential information transferor that yields an efficient economy, yet when it comes deceptive and outright lies its role would no longer serve its purpose but would reverse; i.e. misleading information with

an inefficient and unethical market. In a country with no supervision—as we can say—deceit is expected in our to achieve the set goal; deliver- ing the message of selling the service or product. Extremely alluring messages are sent to attract the viewer and the listener making the product divine or even not from our world. Here, no parties (the listener and the advertiser) can be blamed. They can say whatever they want about the product or service but it is up to us if we listen and believe and feel the deceit.

FUTURE TRENDS

A rhetorical work is any visual or verbal communi- cation that applies rhetorical principles to enhance audience processing or persuasion. Repeated pairings of a brand and celebrity strengthen the as- sociative link consumers establish between brand and celebrity (Bratu, 2010). Positive absurdity arises from illogical relationships among pictorial elements in an advertisement, investigating one particular type of absurdity - surrealism.

Consumers who successfully identify false advertising trigger a process of defensive stereo- typing which prohibits them from believing future ads from the same source or a second-party one (Darke and Richie, 2007). Furthermore, correc- tive advertising doesn’t always work and can even prove problematic as it “undermines responses both to other products advertised by the corrected firm and to products advertised by second-party advertisers” (Darke and Richie, 2008). This goes to show how companies and firms who engage in false advertising risk damaging their credibility and losing the trust of the public for an extended period of time, which could prove catastrophic to their bottom line. Finally, future ads should provide more “product information, truth, and ethical standards” (Milan and Mittal, 2009).

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CONCLUSION

For the advertiser, the ultimate goal is to sell a product or a service. In a worldwide scenery, ad- vertising has an essential social effect in several ways. So deceit is nearly negligible. These regula- tions and laws set, will back fire at the advertiser if wrong or incomplete information was sent or deceit was felt. Thus, sending the message with facts and true numbers are a must but also hiding the negative points if any just to gain competitive advantage.

REFERENCES

Balough, C. S. (2012). A survey of false advertising in cyberspace. Business Lawyer, 68(1), 297–304.

Baumrind, C. S. (1964). Some thoughts on ethic of research. The American Psychologist, 19(6), 421–423. doi:10.1037/h0040128

Bratu, S. S. (2010). The phenomenon of image manipulation in advertising. Economics, Man- agement, and Financial Markets, 5(2), 333–338.

Craig, A. L. Y., Wood, S. S., & Vendemia, J. S. (2012). Suspicious minds: Exploring neural processes during exposure to deceptive advertis- ing. JMR, Journal of Marketing Research, 49(3), 361–372. doi:10.1509/jmr.09.0007

Darke, P. S., Ashworth, L. S., & Ritchie, R. S. (2008). Damage from corrective advertising: Causes and cures. Journal of Marketing, 72(6), 81–97. doi:10.1509/jmkg.72.6.81

Darke, P.S., & Richie, R.S. (2007). The defen- sive consumer: Advertising deception, defensive processing, and distrust. Journal of Marketing Research, 44(1), 114-127.

Fetscherin, M. S., & Toncar, M. S. (2009). Visual puffery in advertising. International Journal of Market Research, 51(2), 147–148. doi:10.2501/ S1470785309200372

La Tour, K. S., & La Tour, M. S. (2009). Positive mood and susceptibility to false advertising. Jour- nal of Advertising, 38(3), 127–142. doi:10.2753/ JOA0091-3367380309

Milan, E. S., & Mittal, B. S. (2010). Advertising’s new audiences. Journal of Advertising, 39(3), 81–98. doi:10.2753/JOA0091-3367390300

Milgram, S. S. (1963). The experiment that chal- lenged human nature. Social Influence, 1963.

Milone, R. S., & Ahmad, M. S. (2012). Insur- ance coverage for false advertising claims. Intel- lectual Property & Technology Law Journal, 24(3), 25–35.

Qiang, Y. S. (n.d.). False advertisements, exter- nalities, and the regulation of false advertising: A conceptual analysis. In Proceedings of AMA Marketing & Public Policy Academic Conference (vol. 22, pp. 65-71). AMA.

Rotfled, H. S., & Taylor, C. S. (2009). The adver- tising regulation and self-regulation issues ripped from the headlines with (sometimes missed) opportunities for disciplined multidisciplinary research. Journal of Advertising, 38(4), 5–14. doi:10.2753/JOA0091-3367380401

KEY TERMS AND DEFINITIONS

Advertising: A discretionary campaign con- ducted and paid for by a business for the purpose of reaching and expanding a market.

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http://dx.doi.org/10.1037/h0040128

http://dx.doi.org/10.1509/jmr.09.0007

http://dx.doi.org/10.1509/jmkg.72.6.81

http://dx.doi.org/10.2501/S1470785309200372

http://dx.doi.org/10.2753/JOA0091-3367380309

http://dx.doi.org/10.2753/JOA0091-3367390300

http://dx.doi.org/10.2753/JOA0091-3367380401

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Branding: Establishing a widely recognized image and relating it to a particular business name or product in a wide fashion establishing a large market.

Deceit: Disguising false information to ap- pear true or otherwise a different image from its true identity.

Distrust: The loss of respect towards an already established honorable source.

Manipulation: Machiavellic orchestration of a person’s perceptions and expectations for the purpose of obtaining from them without their acquiescence a desired outcome which they may or may not be willing to deliver.

Marketing: Establishing the outside boundar- ies of the potential outreach of a business product.

Promotion: Bringing into wide scale aware- ness information about a new business product, process, or system.

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APPENDIX

Learning Objectives

L.O.1: Define Advertising. L.O.2: Differentiate between commercial and noncommercial advertisers. L.O.3: Define deceptive advertising. L.O.4: Discuss several methods the companies use in attempts to deceive consumers. L.O.5: Define Deception and list its primary forms.

Summary

Define Advertising

Advertising is a kind of communication envisioned to convince an audience to either buy or take another action towards products, services, or ideas.

Differentiate between Commercial and Noncommercial Advertisers

Commercial advertisers often seek to generate increased consumption of their products or services through branding, which involves the repetition of an image or product name in an effort to associate related qualities with the brand in the minds of consumers. Non-commercial advertisers who spend money to advertise items other than a consumer product or service include political parties, interest groups, religious organizations and governmental agencies.

Define Deceptive Advertising

Deceptive advertising denotes a producer’s usage of mystifying, deceiving, or blatantly untrue state- ments when endorsing a product.

Define Deception and List Its Primary Forms

Deception is deliberately handling verbal and/or nonverbal memos so that the memo receiver will believe in a way that the message.

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Chapter 16

DOI: 10.4018/978-1-4666-7254-3.ch016

Plagiarism

ABSTRACT

Plagiarism is easily differentiated from piracy. Piracy is the sale of qualified but unauthorized copies of a work, an action grudging the author of profit but not credit. Depriving authors of profit that is right- fully theirs is theft, but plagiarism focuses on ownership credit rather than profit. The main worries for plagiarism are its influence on creativity, motivation, and ability to think in alternative ways. These quali- ties of personality may be negatively impacted by habitual plagiarism. Moreover, the various impacts of plagiarism are lack of information authenticity, fake credit, personality faults, spoiling of professional reputation, and destroying the creative ability of creative professionals. This chapter explores plagiarism.

INTRODUCTION

Plagiarism is proposition that people generally value the esteem of others, particularly their peers. In order to earn the esteem of our peers, we look for the recognition of our originality, creativity, insight, knowledge, and technical skills. Some plagiarism is unintentional due to a psychologi- cal condition called “cryptomnesia,” nonethe- less there is certainly a considerable amount of plagiarism that is conscious and purposeful, the result of rational, cost-benefit calculation. Both are common due to the availability of easily ac- cessible electronic resources, such as Internet, as a result of which it has become so much easier for people to ‘cut and paste’ chunks of unedited text

BACKGROUND

The word ‘plagiarism’ originates from the Latin words ‘plagiarius’, an abductor, and ‘plagiare’, to steal. Generally, plagiarism is the use of another person’s products of mind without acknowledg- ing that they belong to someone else. There are different types of plagiarism with different legal and social aspects. Some ways of plagiarizing include copying and pasting text without proper way of citation, missing citation by using text from a source without citing it, fabricating data by manipulating someone’s research data or find- ings to hide plagiarism, idea theft which occurs frequently in advertising and design, by presenting someone else’s idea as your own, and copyright

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infringement which is reproducing, distributing, or displaying a work without the permission of the copyright owner. In the age of internet and technology, access to information has become very easy, people can find thousands of articles and related publications by simply ‘googling’ their topics, and the sources are difficult to be identified.

Plagiarism affects human creativity and knowl- edge, by making them think less and learn fewer, since no effort is needed to write texts, create concepts and original ideas. Another drawback of plagiarism is that it offends the literary rights of the original author and the property rights of the copyright owner. It is obvious that plagiarism is an ethical issue, which is treated by different meth- ods, such as spreading awareness on individual and organizational levels, and creating codes and regulations to punish and penalize those who get caught in the act of plagiarism.

There are numerous writings and opinions concerning the issues of plagiarism, by many experts. Stuart P. Green (2002), Professor of Law at Rutgers Law School-Newark, in his article ‘Pla- giarism, Norms, and the Limits of Theft Law: Some Observations on the Use of Criminal Sanctions in Enforcing Intellectual Property Rights’ (2002) explores the concept of plagiarism as a proposition that people generally value the esteem of others, particularly their peers. In order to earn the esteem of our peers, we look for the recognition of our originality, creativity, insight, knowledge, and technical skills. This is very common among writ- ers, artists, and intellectuals, who not only enjoy the creative act itself, but also wish to see those acts recognized by others. This desire for esteem produces a norm that Stuart P. Green refers to as the “norm of attribution.” Rendering to this norm, words and ideas may be copied if and only if the copier attributes them to their inventor. Without this recognition there would be fewer inducements to produce new work.

People who value the norm of attribution would regard credit earned for someone else’s work as illegitimate. Undeniably, such people

can attain gratification only if they know that the work they are being known for is in fact their own. However, for many people, the attribution norm becomes a moral obligation, rather than a willful desire to show respect and appreciation to the work of others.

Edward Wasserman, professor of Journalism Ethics at Washington and Lee University in Lex- ington, Va., describes media and journalistic pla- giarism in his article ‘Plagiarism and Precedence’ (2006). He states that journalistic plagiarism “forbids un-credited reuse of what intellectual property law would describe as unique expres- sion”. Many times, looking to describe a reality, journalists come up with characterizations that are indeed original. This deserves credit, however even this principle is not easily applicable. Innovative expression slips into the depths of the Internet, and suffers the risk of non-stop borrowing and lend- ing. The first reporter who described some minor incident as “a wake-up call,” may have imagined he or she had come up with an astonishing new idea; but soon enough, the same idea would be found through Google search in dozens of other web sources. Therefore, the moment of invention is lost, and the whole attempt becomes useless.

Lawrence Lessig (2004), is an American aca- demic best known as a supporter of reduced legal restrictions on copyright, trademark, and radio frequency spectrum, particularly in technology applications. In his book ‘Free Culture’ (2004), he claims that even though creative work has value; the taking of something of value from somebody without approval is wrong, and is a form of piracy. However, the current debate in the US has this turned around. He gives an example of a compos- ers’ rights organization, ASCAP, which sued the Girl Scouts for not paying for the songs which girls sang around Girl Scout campfires. There was “value” (the songs) so there must have been a “right”—even against the Girl Scouts.

Before the Internet, this conflation didn’t mat- ter all that much.

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CURRENT DEBATE AND CONSENSUS

Why do people plagiarize, and how does pla- giarism practice feel to the plagiarist and to his victims? It may seem that some plagiarism is unintentional. Psychologists have described a particular psychological condition “cryptomne- sia” it is when people by mistake believe that they have produced a new idea when they have actually retrieved an old one from memory. The plagiarist is talented in his own way and has no need to steal. He leaves clues that are easy to detect and frequently repeats his offence. He acts out of an unconscious desire to be caught, like a kleptomaniac. Secretly, he intends to cause his own destruction and self-deception.

However, there is certainly a considerable amount of plagiarism that is conscious and purposeful, the result of rational, cost-benefit calculation. A designer who is too short of time, imagination, or initiative to create a work of his own, so he steals a design from an Internet gallery site and presents it as his own creation.

Main worries regarding plagiarism are its ef- fect on creativity. The creativity of an individual is associated with many traits. “One of the traits is motivation, that a person should be motivated towards creative variation of some process. The person should also have the capability to think in alternative ways to an existing or new problem. In addition, the person should have an ability to convince others about his or her contribution. These qualities of personality may be negatively impacted by habitual plagiarism” (Naveed, 2010). The student, researcher or an artist would be copying the work of others only and the thinking ability will fade way. Plagiarism ruins creativity. At the heart of the problem is the availability of easily accessible electronic resources, such as Internet, as a result of which it has become so much easier for people to ‘cut and paste’ chunks of unedited text.

The various impacts of plagiarism are lack of information authenticity, fake credit, personality faults, spoiling of professional reputation and destroying the create-ability of creative profes- sionals. Some of the affects are obvious while others may appear after a long time. One problem linked to plagiarism is the lack of identification of the authentic source of a knowledgeable work. A large research database is obtainable over the Internet in any research area and the search engine yields many results when looking for some topic. Now someone looking for some specific subject or idea has choices to pick among so many links. If the source of information sought is not original, it will divert the direction of research. The main problem of plagiarism is, of course, the fake credit of a plagiarist and the lost credit of an original source of the work. The honest students get frus- trated when the students who plagiarize score well and even better than them, since the honest students put a lot of time to do an assignment by their own effort. Same applies for a designer who presents an artwork as his own, and takes credit for it, while the real creator is left without appreciation (Naveed, 2010).

The ethical aspects of plagiarism are even more severe. According to R. McCuen (2008), “plagiarism activity is a 5-step process of decision whether to plagiarize or not. After the plagiarism has been done by someone, he or she either may decide to avoid it in the future or, on the other hand, may rationalize his or her act”. As time passes, this act will bring many faults in one’s personality and moral values. It would disturb the rational thought process; sacrificing moral values such as honesty and trust. It is argued whether Plagiarism is like theft, or there are ways to justify it.

FUTURE TRENDS

Investigating plagiarism in professional bio- medical literature include the development of the

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electronic Text Basic Local Alignment Search Tool (eTBLAST) textual analysis software and its use as a plagiarism detector, the impact of the findings on scientific journal editors, authors, and the peer review system, and the suggestion of a collaboratively-edited scientific publication. (Harold, 2014). On the other hand, the issue of student plagiarism in colleges and universities has been receiving increased attention in recent years (turn-it-in software). “Many studies show that faculty has a variety of responses when they suspect plagiarism; some report it and others choose to address it themselves” (Bennington & Singh, 2013). “Because the identification of student plagiarism and the choice to report or not report rests with faculty, faculty perceptions of administration’s role and how those perceptions influence their intent to report plagiarism. The Theory of Planned Behavior serves as the frame- work to examine this issue” (Bennington & Singh, 2013). A straight association was established between faculty behavioral beliefs, normative beliefs, and control beliefs and their intention to report plagiarism to management. The study found that faculty would be more likely to discourse suspected behavior of student plagiarism if there was a specific procedure for faculty to trail and that they would be more likely to file reports if a committee of faculty, students, and administrators arbitrated suspected actions of student plagiarism.

CONCLUSION

There is consensus about:

1. Plagiarism might be both intentional and unintentional.

2. Habitual plagiarism has a tremendous nega- tive effect on human creativity, since it leads to exerting less effort and decreases the motivation to think of new ways and ideas.

3. With the birth of Internet, it has become extremely easy to plagiarize and hide the traces of the act, as a huge database is avail- able over the Internet, and any search engine returns millions of sources which are difficult to trace.

However, the following questions are still unanswered:

1. What are the boundaries of borrowing, what form such borrowing can take, and what kinds of material can be borrowed to distinguish between inspirational borrowing and plagiarism?

2. Should plagiarism be viewed as a strict li- ability offense, or it should be distinguished from unintentional inspirational borrowing?

3. Is punishment and penalizing, or ethical education a more successful way to prevent plagiarism?

REFERENCES

Bennington, A. J., & Singh, H. S. (2013). Faculty expectations of administration: Predictors of in- tention to report student plagiarism. Academy of Educational Leadership Journal, 17(4), 63–76.

Bitton, M. S. (2008). Exploring European Union copyright policy through the lens of the database directive. Berkeley Technology Law Journal, 23(4), 1411–1470.

Carlton, D.S. (2006), Welcome to the credibility loop. David Report, 4.

Geach, N. S. (2009). The future of copyright in the age of convergence: Is a new approach needed for the new media world? International Review of Law Computers & Technology, 23(1/2), 131–142. doi:10.1080/13600860902742588

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Green, S. P. (2002). Plagiarism, norms, and the limits of theft law: Some observations on the use of criminal sanctions in enforcing intellectual property rights. The Hastings Law Journal, 54, 167–242.

Hamilton, J. S. (2007). When copywriting ends and copyright begins. Campaign (UK), 42, 8.

Hansen, B. S. (2003). Combating plagiarism. CQ Researcher, 13(32), 773–796.

Harold, G. S. (2014). The case of the stolen words. Scientific American, 310(3), 64–67.

Lessig, L. S. (2004). Free culture. New York: The Penguin Press.

Mattingly, T. S., & Samardzija, M. S. (2009). Minimizing liability for copyright infringement. Intellectual Property & Technology Law Journal, 21(1), 16–20.

McCuen, R. H. (2008). The plagiarism decision process: The role of pressure and rationalization. Education, 152–156.

Moulton, J. S., & Robinson, G. S. (2002). Plagia- rism. In Encyclopedia of ethics (2nd ed.). Garland Publishing.

Naveed, I. S. (2010). Electronic media, creativ- ity and plagiarism. ACM SIGCAS Computers & Society, 40(4).

Office of Assessment. (2010). Dealing with pla- giarism. In Teaching and learning at Curtin (pp. 48–51). Teaching and Learning.

Pavel, A. S. (2009). Reforming the reproduction right: The case for personal use copies. Berkeley Technology Law Journal, 24(4), 1615–1615.

Stern, R. S. (2000, November-December). Nap- ster: A walking copyright infringement?. Micro Law, 4-5 & 95.

Wasserman, E. S. (2006). Plagiarism and prece- dence. Media Ethics Journal, 18(1).

KEY TERMS AND DEFINITIONS

Author Rights: The original claim of owner- ship by one person for their intellectual contribu- tions.

Creativity: Artistic work of the mind in pursuit of new free expressions.

Intellectual Property: Declared and registered claims of ownership for creative works.

Morality: Self-conscious virtue in the conduct of a person’s own behavior as inspired from social tradition or inner beliefs.

Originality: Uniqueness and priority claim to any work of the mind.

Piracy: Systematic theft of priority claims and legitimate ownership of other people’s wealth or intellect.

Plagiarism: Borrowing without permission or without recognition of other’s intellectual contri- butions in order that they appear to be original.

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Learning Objectives

L.O.1: Define plagiarism. L.O.2: Determine the reasons that lead to plagiarism. L.O.3: Discuss how plagiarism practice feels to the plagiarist and to his victims. L.O.4: Distinguish between plagiarism and piracy.

Summary

Define Plagiarism

Determine the Reasons That Lead to Plagiarism

Some plagiarism is unintentional due to a psychological condition called “cryptomnesia”, nonetheless there is certainly a considerable amount of plagiarism that is conscious and purposeful, the result of rational, cost-benefit calculation. Both are common due to the availability of easily accessible electronic resources, such as Internet, as a result of which it has become so much easier for people to ‘cut and paste’ chunks of unedited text.

Discuss How Plagiarism Practice Feels to the Plagiarist and to His Victims

Main worries for plagiarism is its influence on creativity, motivation, and ability to think in alternative ways. These qualities of personality may be negatively impacted by habitual plagiarism.

Moreover, the various impacts of plagiarism are lack of information authenticity, fake credit, personal- ity faults, spoiling of professional reputation and destroying the create-ability of creative professionals.

Distinguish between Plagiarism and Piracy

First, plagiarism can easily be differentiated from piracy. Piracy is the sale of qualified but unauthorized copies of a work, an action grudging the author of profit but not credit. Depriving authors of profit that is rightfully theirs is theft, but here we focus on credit rather than profit.

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Chapter 17

DOI: 10.4018/978-1-4666-7254-3.ch017

Bribery and Corruption

ABSTRACT

Bribes are mainly directed at government officials, although they could be directed at the employees and managers of business firms. However, bribery appears to be a self-defined crime. Bribery of small public sector employees is a white-collar crime. However, bribery also exists in high-level decision- making processes, whether political, economic, or corporate situations. These are large-scale bribes, consisting of millions and/or billions of dollars, paid out to executives and public officials in return for construction contracts, oil contracts, telecommunication contracts, etc. Although punishments exist and are implemented, it is up to the individual alone to make the final decision and choose between personal moral value system and personal welfare in opposition to serving the public welfare. This chapter ex- plores bribery.

INTRODUCTION

O, this life| Is nobler than attending for a check, Richer than doing nothing for a bribe, Prouder than rustling in unpaid-for silk. - William Shakespeare

Though the bribe be small, yet the fault is great. - Lord Edward Coke

Bribery, in itself, is a term that is described as the attempt of offering, promising, giving, accepting or soliciting of something else of value to an indi- vidual or company in return for an illegal action

or a breach of trust, such as an attempt to sway a view, opinion, or decision in a direction or another. These inducements made are called bribes: they are usually described by the broadly construed term “anything of value”, which consists not only of monetary rewards and cash equivalent but also of favors such as gifts, discounts, entertainment (drinks and meals), transportation and lodging benefits or even promises of future employment. The most common types of bribery are bribery by/of a public official, bribery by/of a witness, bribery of a foreign official.“Few men have virtue to withstand the highest bidder.” (Washington, 188x) describes the interrelationship that bribery creates with the people involved in it. Bribery, in

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itself, is a term that is described as the attempt of offering, promising, giving, accepting or solicit- ing of something else of value to an individual or company in return for an illegal action or a breach of trust, such as an attempt to sway a view, opin- ion, or decision in a direction or another. These inducements made are called bribes: they are usually described by the broadly construed term “anything of value”, which consists not only of monetary rewards and cash equivalent but also of favors such as gifts, discounts, entertainment (drinks and meals), transportation and lodging benefits or even promises of future employment. A tricky issue with these inducements is that the latter have no minimum or maximum value, and are perceived and valued very subjectively and differently by the briber and bribed individual, making it harder for authorities to determine whether the offer is actually considered a bribe.

Given the tough economic conditions that plague most of today’s world, competition among corporations and businesses remains as fierce as it is ruthless. Any sliver of profit could spell the difference between a firm’s survival and its downfall. That being the case, some managers or key executives in a firm might resort to unethical practices in order to get slightly ahead of the rest of the crowd and gain a faint competitive advantage to ensure the survivability of their firm. One of these unethical practices is bribery. Simply put, bribery is the corrupt act of giving a bribe, which is a sum of money, a favor, or any perceived object of value (materialistic or non-materialistic) destined to influence the behavior of an individual in favor of the briber. The UK Bribery Act defines bribe as “the payment of money, another financial ad- vantage, or a non-financial advantage, including, for example, lavish hospitality or gifts” (Maton 2010). In the business world, briberies are mainly directed at government officials, although they could be directed at the employees and managers of competing firms.

BACKGROUND

Corruption is not only the sad circumstance of government officials skimming off cash for their own interest. It includes incidences where the system does not function the way it is supposed to operate, and normal people are left in a dilemma, having to offer a bribe for the medicine or the certificates they need. Public corruption involves the misusage of the existence of a public office for personal benefit. Private corruption, however, exists among people in the private sector, like a Mafia forcing some local business to give it money.

There are many types of corruption, some includes:

• Bribery: The offering of money or favors to a person in exchange of a service.

• Nepotism: Preference revealed by public officials to friends or relatives.

• Fraud: Dishonest behavior towards the government through deception.

• Embezzlement: Taking money or other property that do not belong to the person.

• Administrative Corruption: Corruption that changes the application of rules, such as getting a license even if you don’t qual- ify for it.

• Political Corruption: Corruption that im- pacts the making of laws, regulations, and policies, such as cancelling all licenses, and gaining the solitary right to function the beer or gas monopoly. ◦ A key difference exists between ad-

ministrative corruption and political corruption.

General History

The Assyrians first recognized the term “bribe” as a concept and as a reality in 3,400 BC. Dutch archeologists found an administrative center giving

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evidence of its considerable existence at the time: the archive of an interior minister (AshourAdin) listed data of “employees accepting bribes” as well as the names of senior officials and an Assyrian princess. The list is believed to be a reliable source of facts since the minister was considered to be the most powerful man in the state after the king.

As a word, however, the word “bribe” came to exist in the French language meaning a “piece of bread” and was slowly transformed linguistically to mean begging, theft and stealing later on. This transition of meaning gave the word the opportu- nity to be used by an English contemporary writer, Chaucer, in his works in the 14th century. The word referred to an idea of extortion, where the bribe would make reference to the sum of money demanded, and the briber was the person doing the menacing in return for the money. The word evolved from there on in the English language till its meaning flipped in the 16th century: briber finally meant the person giving the money in return for a favor and a bribe was now an inducement made voluntarily.

The following timeline shows the evolution of bribery in history. The case of the Assyria Empire in 3400BC, is the only documented case found that far back in history, and is therefore not on the timeline below. Mostly, the peak of bribery remarkably occurs in the late 1900s on an international level.

This rise in crime rate associated with bribery on an international scale lead to the creation of the Foreign Corruption Practices Act (FCPA) in 1977, and which was later amended in 1988. This act prohibits U.S. firms from paying bribes or using middlemen as conduits for a bribe when seeking to do business in foreign markets. As per the explanation given by the FCPA Enforcement website, the act “generally prohibits U.S. compa- nies and citizens, foreign companies listed on a U.S. stock exchange, or any person acting while in the United States, from corruptly paying or

offering to pay, directly or indirectly, money or anything of value to a foreign official to obtain or retain business” and also requires proper book and record keeping. The Securities and Exchange Commission (SEC) as well as the Department of Justice (DOJ) therefore jointly enforce the FCPA.

Current Situation of Bribery

Several anti-corruption laws have been passed with the aim of limiting the act of bribery, as well as dealing with its implications and ramifications. The UK Bribery Act, passed in 2010 in Great Britain and implemented in 2011 is considered by many pundits as the toughest and strictest anti- bribery law for three main reasons (Mihai & Alina, 2013). Firstly, the UK Bribery Act has a wide jurisdiction which means that it is also applicable outside the borders of the United Kingdom. In fact, its jurisdiction is even wider than the US Foreign Corrupt Practices Act of 1977. Secondly, the UK Bribery Act applies to bribery in both the private and public sectors. Finally, it contains “a corporate offence of failing to prevent bribery by someone performing services on behalf of a commercial organization” (Maton, 2010). In short, the primary offences that the Act criminalizes and punishes are the following:

1. Proposing a bribe, 2. Taking a bribe, 3. Bribing a foreign public official, and 4. Failing to prevent bribery.

In 2008, Chen, Yasar and Rejesus wrote an article exploring the factors that affect the occur- rence of bribery to public officials. The factors studied were both macro factors that have to do with the external environment of the firm, as well as micro factors that dealt with the firm itself. On the one hand, the macro factors studied in this cross-country analysis included:

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1. English lawful origin, 2. The number of adult schooling, 3. Populace, 4. Uncertainty avoidance index, 5. Masculinity, and 6. Power distance index.

On the other hand, the micro factors studied in the paper were:

1. Dependence on infrastructure, 2. Exporting activities, 3. Perceptions regarding the consistency of

government regulations, 4. Probability of going to alternate power, 5. Present sales, 6. International operations, 7. Foreign ownership, 8. Government ownership, 9. Number of employees, 10. Number of competitors, 11. Percentage of revenues as financial support

from the government, and 12. Percentage of sales from the government.

The results of this study revealed that among the micro-level factors cited above, those who contribute most to the incidence of bribery are dependence on infrastructure, and likelihood of going to alternative authority (variables that grant power to public officials over the firm) as well as exporting and competition (Chen et al, 2008). Among the macro-level factors cited above, those who contribute most to the incidence of bribery are the British legal origin, average years of schooling for adults, populations size, and the masculinity index (Chen et al, 2008). Amid the reasons and factors that influence the incidence of bribery is globalization. In 2010, Baughn et al studied the effect of globalization on the preva- lence of bribery. The authors argued that due to differences in societal norms and legal regulations between countries, the act of bribery is subject to increases and decreases when conducting inter-

national operations. They state that “bribery in international business transactions can be seen as a function of not only the demand for such bribes in different countries, but the supply, or willing- ness to provide bribes by multinational firms and their representatives” (Baughn et al, 2010). The study was conducted on firms from 30 different countries and probed their propensities to engage in acts of bribery. The results revealed that the tendencies to offer bribes were lowest in firms based in countries who were countersigners of the Organization for Economic Cooperation and Development (OECD) anti-bribery convention, in countries which did business with richer nations, and when corruption was not tolerated in the mul- tinational’s home countries (Baughn et al, 2010).

A portion of the literature concerning bribery addresses methods that can be adopted by firms to limit its frequency of occurrence. In 2008, Joseph McKinney and Carlos Moore conducted a study that sought to investigate the effects of a code of ethics on the prevalence of bribery inside firms. More specifically, the study aimed at assessing whether or not the presence of a written code of ethics inside a corporation would result in a de- crease in bribery and other corrupt practices. Also the study sought to relate the presence of a code of ethics with the amount of revenues generated from international operations. The results of McKinney and Moore’s study have shown that the respondents from companies that have a written code of ethics were “significantly less likely to find international bribery acceptable” (McKinney & Moore, 2008). Moreover, the results revealed that companies that generate revenue from international operations were more likely to have a written code of ethics than those who do not. This fact could indicate that the act of bribery is more likely to occur when conducting international business (McKin- ney & Moore, 2008). In a similar study, Berinde Mihai and Andreescu Nicoleta Alina explain the importance of companies having a written code of ethics in combating bribery and other unethical practices. The authors define the code of ethics

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as “tool, a means of transmitting the organiza- tional culture to its members, conferring them a sense of common identity, like the membership of a team”. Mihai and Alina stipulate that “both managers and employees need guidance on how to act in situations that raise ethical questions”. They go further to stating that “The best way to solve these situations is through the existence of a code of ethics that both managers and employees can turn to for guidance at any time and reach the right directions” (Mihai & Alina, 2013).

The common belief is that bribery will help business firms gain a competitive advantage over competing firms and thus generate more profit. However, a study carried out by James Weber revealed the opposite. In fact, drawing on previ- ous work done by Fisman and Svensson, Weber observes that bribery could have a negative impact on the firm’s sales (Weber, 2007). The original study was conducted on a number of Ugandan firms spanning a wide range of industries. The results of Fisman and Svensson revealed that a 1% increase in bribery resulted in a 3.3% decrease in annual growth for the firm. Bribery has a more negative impact when compared to the decrease in annual growth rate that the firm faces as a result of tax increase. Due to this fact, Weber concludes that “it would be accurate to say that bribery had a more negative impact on firm growth rates than did taxation”.

IS BRIBERY LOCAL OR INTERNATIONAL?

A local scandal went extremely big on the inter- national level – that of the Oil -for-Food Program (OFFP) implemented by the United Nations in Iraq in 1996. The latter was initially put in place in order to alleviate the effects of economic sanctions against the Iraqi people under the dictatorial re- gime of Saddam Hussein. The program’s approach consisted of selling Iraq’s oil and depositing all of the returns made by those sales in UN approved

bank accounts: the latter amounts of money were then to be used by the UN to purchase humanitar- ian goods and services, mainly food, medicine, shelter, clothing, etc… for the Iraqi people.

It is recorded that Iraq sold more than $64 billion of oil in a period of 5 years, between 1997 and 2002. However, after suspicions of abuse of the program and an investigation lead by the Independent Inquiry Committee (IIC), it turned out that over $1.8 billion had been paid in bribes. Saddam Hussein had bribed a UN official to fake and wrongly record the actual sales transactions of oil: for instance, when a barrel was recorded to have been sold at $60, it was actually sold at $40 to certain company spread across the globe having tight connections with Saddam Hussein or his regime. The barrels of oil were always actually delivered, and the scandal lied in the companies buying the oil: these commissioned companies were sometimes phony companies, and the oil received would be sold not at $60 but at a price of about $70. The $10 difference was the net profit of the commissioned company, whereas the $20 difference between the real price at which a barrel was bought and the price that was recorded in the UN books was transferred to Saddam Hussein’s off-shore accounts.

The bribed UN official was also receiving mass payments on his personal bank accounts, which raised questions with the IIC: when he was asked about them, a certain lie about his aunt transferring him these funds from Cyprus was told. However, upon investigations, UN officials found out the truth about his aunt being incapable of transferring such large amounts of money to him, which lead to uncovering the scandal being played out behind the Oil-for-Food Program. The latter unveiled the names of many politicians, businessmen and of- ficials on a worldwide scale who were involved in this scheme. Legally, it is choking to know that only the UN employee who had altered the books was imprisoned, whereas all other involved parties were not, primarily since the UN had no jurisdic- tion. It is interesting to know however, that most

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of the involved politicians and their businesses were located in countries supportive of the regime lead by Saddam Hussein in Iraq.

Five international mini-cases have affected the course of the law worldwide when it comes to bribes. In each case penalties were received by each company for the violations that were incurred. These cases are not only spread out across the globe, but also show occurrences of bribery at various stages of the targeted projects. The Chinese used indirect bribes by sending the government officials on trips whereas in Iran, a direct monetary bribe was given to the son of a former president. In Egypt, which was a remark- able case, the aircraft company bribed several Egyptian officials in order to get the aircraft contract for the country and gain an edge over the other companies that were bidding on that same contract. In Germany however, a multinational with a very respectable reputation in the Technol- ogy and Telecommunications industries bribed its way into larger market share. However, bribery is evident on a cross-country basis including coun- tries such as Bangladesh, China, Argentina and Venezuela amongst others. Moreover even in a strict religious regime where the “Shariaa’s Rule” is fiercely applied and bribery and theft are forbid- den in all their forms, bribery scandals are known to break out in public. All of the latter resulted in unethical behavior, whether the bribes were of smaller or larger scales. If gone undiscovered, the bribes paid represent on average a maximum of 1% of the contracts’ net amounts. However, if the bribery scams were revealed, the penalties would amount to a much higher price than the contract itself. Also, the company’s image and reputation would be on the edge, and customer goodwill lost.

The Dark Secrets of Tema Harbor: Bribery Case in Ghana, Africa

Security officers in Tema Harbor cooperate with clearing agents to snip money to the state through

tax evasion and bribery, beating the country’s revenue mobilization hard work. Among all these immoral doings, some agents have developed ways of tallying the cost of bribery charges to the fees they ordinarily collect from importers. This reality makes the importers suffer while dealing with imports.

History of Bribery in Lebanon

The Lebanese judicial system defines bribery as a crime: however, it does so very broadly and the existing penalties have not been updated since their official publication – these fines range between 100,000 – 1,000,000thousands of Lebanese Li- ras which use to be an important sum of money before the currency was weakened versus the US Dollar (1992), but now stands at 60 to 600 US $. This has driven the Lebanese people to take the laws against bribery for granted which is why the subject is dealt with more rigorously in the US legal system.

Firstly, bribery is considered to be a criminal offense as per the common law – more specifi- cally, a white-collar crime. Given the latter, the following are some of the several kinds of bribery that have been defined by the law:

• Bribery by or of a Public Official: Includes any person whose job is to rep- resent the United States and that gives or accepts a bribe for an unlawful change of duties.

• Bribery by or of a Witness: For a change in testimony.

• Bribery of a Foreign Official: Was made illegal by the FCPA (Foreign Corruption Practices Act). It prohibits the bribing of international officials to get important business deals. However, this act does not prohibit “grease payments” to speed up the paperwork processes.

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The aforementioned offenses are taken very seriously when it comes to punishments, which usually include a fine totaling up to three times the value of the bribe given, and sometimes a jail sentence of up to 15 years.

However in Lebanon, application of the law is taken rather lightly when it comes to crime and punishment. The political system that has been implemented in Lebanon since the establishment of the Republic in 1929 is one that is dominated by confessional groups (Confessionalism). The sufferings that the Lebanese have endured due to 18 years on internal warfare (1974-1992) persist today in form of grudges: people tend to support their sect at the expense of their moral beliefs. Also, the Lebanese administration was structured based on the French bureaucratic system’s influ- ence during the mandate in the 1920s. Later on, President Fouad Chehab set the foundations of the public civil service in the 1950s. Since then, there has been no serious attempt to modernize the system, therefore leading to an administration that is unable to meet modern challenges and growing demands in the world of today. All of the latter has lead to a paralyzed administration of the judicial sector using outdated laws still being applied and some that are not even implemented. Moreover, judges are at mercy of politicians since the indirect acceptance of the latter officials is required for their hiring.

The “rule of law” has gone in general disre- gard of the law not only by the citizens but also by the state itself, inducing a culture of absence of accountability and responsibility amongst the people. Simple procedures require uncountable signatures and can take up to several weeks in processing: it is safe enough to say that the bribes used are the ultimate solution to reduce govern- ment costs (paper circulation by postal services) as well as save time and energy for the citizens. In due course, these citizens that find themselves facing firm economic difficulties and being short

on financial resources have to prioritize their inter- ests and perceptions on things. On the other hand, bureaucrats who can hardly provide an average standard of living will not refuse “bribes” as an additional source of income. Ultimately, bribes not only facilitate transactions in the public sec- tor but also support the livelihood of the public servants. They are incentive payments, and at the end of the day, transactions will not be processed without them.

A very recent case, serving as proof of the aforementioned, is that of a Lebanese judge who was proven to have accepted a bribe of $200,000 for an unlawful verdict in a drug case, and set up several assassination scenarios to lure the Higher Disciplinary Committee into thinking that his life was endangered. However, this case has served as a precedent in the history of the Lebanese Judi- ciary System. It is the first time that a judge has not only gotten fired, but was also sentenced by the Judiciary Committee to be denied indemnities and retirement pensions. This case emphasizes the fact that it has taken Lebanon 70 years (since the Independence in 1943) to start a serious anti- corruption fight, headed by the Justice Minister who stated that “The plan to cleanse the Judiciary has started and no one can stop it; it will continue in spite of any political or personal intervention.”

How Bribery Presently Plays out in Lebanon

The man who offers a bribe gives away a little of his own importance; the bribe once accepted, he becomes the inferior, like a man who has just paid for a woman. - Greene, (Henry) Graham, The Comedians, pt.1, ch.4.

Four major sectors are being studied by the Lebanese Transparency Association (LTA): the electricity sector, the health sector, the construc- tion sector and the reconstruction sector. However,

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since the information available on these four topics is inaccessible, the LTA helped determine smaller and more reachable sectors. Therefore, the Real Estate Registration Department, known as the “Dawa’er Al Iquariya”, located in Baabda. A legal document that was required (“IfadaIquariya”), which usually costs 9,000 LL and should take a maximum of 2 minutes to be printed out. However the process cost about 50,000 LL and took two days, since the amount of time that it takes to get the paper is determined by the amount of bribe to pay for it. Moreover, bribery is very obvious and detectable by any visitor, since employees take bribes for every paper that needs to be processed. The amount of money paid per bribe varies between the employees, depending on their position and the required signature. In addition, brokers approach individuals that walk in to the department, offering them their “unethical and il- legitimate” services in return for a certain amount of money – a “bribe”. Also, we asked employees about the drop-visits of the Ministry of Finance’s supervisors. The response was as chocking as the obvious bribes that were being made: the officer specifically told us that they had nothing to be afraid of, since they always know beforehand about the drop-visit that are about to be made.

Moreover, we have witnessed the very famous Ottoman Records, which is a book of all the exist- ing real estate records in Lebanon. When a paper related to any plot of land, apartment or building is required, the employee must go through these Ottoman Records – which needs two men simply to be carried onto a table, and consists of old run down pages. This processing system used is very time consuming and hectic for the employees, and therefore encourages an atmosphere of bribery. The computerization of this process and the digi- talization of all this information is a very costly process for the government, however it would limit bribery since the time and energy needed by an employee to process an operation would be

much less than what is required today. Bribery in this department, just like the rest of the Lebanese public sector offices, is a mentality as well as a culture that the people have grown accustomed to: employees prefer to gratify their personal benefits rather than obliging to their duties to the public’s welfare. Public employees have lost faith in the public sector’s administration and governance, in addition to the fact that no serious legal action is taken even when public knowledge of all this bribery exists to the public.

What Is Happening at the Port of Beirut?

It is important to contrast between grand corrup- tion which involves considerable sums of cash and typically high-level officers and petty corruption which involves smaller amounts and usually more junior officers. Levels of corruption may differ within a country for diverse kinds. Corruption at the port of Beirut, deals with the bribery type at the grand corruption level involving several hundred millions of US$ annually. Some estimate the amounts of siphoned money above one billion US$ per year.

It is a relation between the merchant or cus- tomer and the agent—broker officer—operating in the port. The Beirut Port ought to be a significant source of income for the Lebanese’s government from import tariffs. However, the corruption level that exists there is very high.

The water in Beirut port doesn’t freeze during the winter. Since they are available all year long, warm water ports can be considered as an economic interest. It serves as the country’s main seaport, cruise home port, port of call, and Cargo ports. Furthermore the Lebanese economy depends on imports for more than 70% of the GDP. In peace time, customs tariffs represent the main treasury revenue for the Central government of Lebanon.

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The Process of Import/Export Merchandise at the Beirut Port

From filing the declaration and until the payment of duties and the retrieval of goods, the procedure of customs clearance passes through the follow- ing phases:

1. Preparation, signature and attachment of the required enclosures to the declaration.

2. Presenting the declaration for admission. 3. Registration of the declaration. 4. Payment of manifest. 5. Payment of permits (if necessary). 6. Referral of the declaration to the Inspector. 7. Verification of declaration (Inspection). 8. Calculation of the declaration (determination

of duties and any other due sums). 9. Signature of the Head Inspection offi-

cer (with the possibility of performing a counter-inspection).

10. Auditing of declaration by the audit officer. 11. Registration of duties in the daily register. 12. Issue of receipt. 13. Payment of duties. 14. Clearance of goods. When the product arrives

to the port, The declaration of the product is saved (green line) or sent to the inspector (red line). If the declaration is accepted, the admission officer shall order its registration and evaluation. If red, the declaration is not accepted by the admission officer, the declaration shall be returned to the declaring party to perform the required corrections.

15. The declaration and its enclosures are sent to the selected inspector through administrative line.

16. The declaring party submits the evaluated declaration to the inspector.

17. The inspection is performed in the presence of the declaring party. The inspector shall

note the result of such inspection on A5 form attached and made part of the declaration.

18. If the inspector discovers any discrepancies, he shall log them into the system in order to modify the declaration, if such discrepan- cies represent a customs breach. Then the declaration is signed.

The Chief inspector reviews the declaration and either approves it and signs it or rejects it. He shall, at his sole discretion, perform a counter- inspection. A modified evaluation shall be printed or the first evaluation shall be modified.

A Lebanese cleaning company frequently imports most of its cleaning tools from China such as vacuums, single discs, dusters, brooms, squeegees. While another company imports pest control tools and products from the US such as mouse traps, special outfit, special product. Both companies go through the import transaction at the Port of Beirut. Both usually do it in the same way: the easy way. They pay an illegal small amount of money in comparisons with a large legal amount, without knowing the procedure, having a clean rapid operation in delivering their merchandises. They only receive a call from the port telling them that the merchandise is ready for delivery., and it is on the way to the company’s location.

If a merchant is importing goods for the value of $500,000 he must pay 15% ($75,000) plus 10% value-added tax (VAT) ($50,000). In addition to the Local Consumption duty and value added tax, each declaration is subject to a lump sum of 50,000LBP which represents the value of the stamps that must be posted on the customs declara- tion, and we don’t forget the money to the clearance agent who finalizes the process; a lump sum of $5000, ending up with the sum of $130,000 to be paid as a legal procedure. This amount excludes any and all other subsequent expenses incurred by the buyer and they were not covered by the price

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(including but not limited to, shipment, insurance, unloading etc.) until the arrival of goods to Leba- non. The 15% varies according to the nature of imported goods. Sometime it may reach 100% for goods that have the same production in Lebanon where it might be considered as a threat to the Lebanese local product in term of competition.

For a Lebanese merchant importing goods for the first time, the moment he arrives at the entrance of the port two agents approach him and asked him whether he prefer to do it the easiest way (illegal) or the hardest way (legal). If it the hard way he has to pass through the precious mentioned procedure, pay the $130,000 plus, if the merchandises, which are stored within the vicinity of the Customs area or in the yards or warehouses managed directly by the Customs Administration for a period of more than five days, are subject to storage fee. It is deliberate to add extra costs for storage of goods by postponing their release through a net of methodically created interests. And if he holds suspicious goods he should go back for revision and interrogations etc...

However, if the merchant chooses the easiest way to import the product, he hands a broker “a flat fee” over. This deciphers into a proposition of a lot of money covering customs fees, value-added tax (VAT), bribes for customs agents and a gain for the broker. It does not matter if the container carries gold or vegetables

Port Beirut is regularly used for reexporting. For instance, if a trade man imports new computer screens to Lebanon, he will pay customs and VAT fees. If they are later reexported, the paid VAT may be reclaimed from the Ministry of Finance. This legal process, however, may be bitter and immoral dealers use it to illegally acquire massive amounts of cash. These computer screens can be listed for exportation, but a customs person and a bribed agent may cooperate to guarantee that instead of computer screens, the container contains locally made bags of chips. Therefore, the trade man is

going to receive back the VAT he already paid and pocket the VAT he collects from customers buying the screens Lebanon.

These corrupt people sometimes feel sulky towards the minority that actually follows legal rules and tries to separate them. Some brokers aren’t even registered but tend to use the stamps of licensed colleagues to do their work. Corrupt brokers are thought of having a politician helping them out.

ACTUAL RESOLUTION

The minister of Finance is held accountable for solving all of this corruption. However, this issue has been going on for a while and it will be very hard for anyone to do anything at this point. People who are gaining from this corruption claim that the minister of Finance is actually making an effort to fix the problem. Beirut Port employees protest that those presenting themselves to the minister as correctors are actually themselves among the most knowledgeable in the corruption arrangements.

PROPOSED RESOLUTION

The resolution of this problem should begin at the very top by placing the right people in the positions of General customs manager and head of the Higher Council of Customs. Next, the Port of Beirut has progressive scanners that have the capability to carry out an internal examination of containers without opening them. Furthermore, Lebanese citizens, tourists, traders and passengers should be informed and introduced to their rights and obligations towards the Customs Administra- tion which, like any other government adminis- tration, was initially formed to provide services to the inhabitant and to secure the appropriate amenities that uphold his rights and reserve his

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dignity and also pledge the rights of the Treasury and the compliance with the laws and regulations governing the procedures of entry and the exit of individuals and goods through the Lebanese borders.

HOW TO AVOID THE NEGATIVE AND PROMOTE THE POSITIVE

The universe would not be rich enough to buy the vote of an honest man. - Gregory I, the Great (Saint Gregory).

The private sector is not excluded, and Corporate Governance should be promoted within it, in order to reduce corrupt internal practices. In the public sector however a wider range of interesting solu- tions are possible to fight the bribery problem in the country: the following is a summary of those possibilities.

• Revitalization of the Administration: Either by reorganizing it or developing it in such a way to immunize it against cor- ruption. The latter could be done by: ◦ Downsizing the Lebanese “adminis-

trative cadre”, that is too big for such a small country, in order to lessen the existing departments and the staff.

◦ Restructuring the administrative de- partments that sometimes overlap in jurisdiction or are repeated in differ- ent ministries.

◦ A new hierarchy should eliminate old positions that can now be replaced by the technological advancements.

◦ A new Human Resources (HR) Perspective should be adopted to gov- ern the administration, its personnel and its policies and procedures.

◦ Rewards and Punishment System by lifting the immunity of public ser-

vants and holding them accountable for their actions, while rewarding them “based on merit” and punishing them “fairly.”

◦ Salaries of the public sector should be increased in order to reduce the gap with the minimum income needed for a good standard of living, therefore eliminating the need for illegitimate income sources.

◦ Simplification of procedures to re- duce unnecessary procedures, signa- tures and interaction with the pub- lic: creating a “one-stop-shop for procedures.”

◦ Education of the public servants on the rights of citizens and on the con- sequences of corruption on them- selves and the institution. The citi- zens should also be more aware of their civil liberties.

◦ E-Government by implementing technological advancements (IT and Telecom mainly) that reduces the in- teractions with the public, speeds up processes, increases efficiency and eliminates political interferences.

◦ Ombudsman Office should be es- tablished: an impartial authoritative monitoring office.

◦ Public Reporting of progress reports on a regular basis to increase the ac- countability and transparency of the public offices.

◦ Access to Public Information for the public that shouldn’t be “contended or limited.”

• Decentralization of Authority: It would give municipalities the power to “fully as- sume the role of local governments”.

• Control Agencies: Should be set up with enough immunity and power to fully en- sure the abidance of the law of the public

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servants by modernizing organizations, eliminating the duplicated tasks, improv- ing audit systems, etc…

• Judicial Independence: Should be done by clearly separating the judicial sector to renew its truthfulness and strictly practice its role while eliminating politically in- fluenced judges, enhancing transparency and empowering the judicial inspections and establishing a “corruption-specialized court”.

• Anti-Corruption Mechanism: Must be put in place: an “ad-hoc” committee would ensure a strategic national combat of cor- ruption and its application with the help of the already existing national committee, OMSAR, etc…

• Policy Reforms: Should include the intro- duction of new laws and an amendment of the existing ones to fit the social changes and better fight dishonesty. Also, inter- national laws and conventions should be signed and integrated.

• Media Reforms: Should be made in order to increase the transparency and account- ability of the sector while reducing the po- litical and religious interventions and be more aimed at the fight against corruption through mass media.

• Civil Society’s Legitimacy: By ensuring that NGOs aren’t corrupt, by empowering the civil society to hold the government ac- countable and allowing injured citizens to sue the government.

• Reinforce Participation and Democracy: By adopting modern, fair, transparent and pressure-free electoral processes to enable the public with enough power to hold those in authoritative positions accountable for their actions.

• Endorse Political Accountability: By separating the legislative and executive

branches, lifting the immunity against prosecution of high-level ruling figures, etc…

• Creating a Public Anti-Corruption Culture: By pointing out the drawbacks and consequences of corruption and get- ting the public as involved as possible in helping the government fight corruption in all its forms.

FUTURE TRENDS

Does bribery provide assistance or does it hurt company development? Some propose that bribery blubbers the wheel of commerce, whereas others tend to believe that bribery sands the wheel of growth (Zhou and Peng, 2012). Companies tend to pick their level of bribery in accordance to their surroundings and the fact that the benefits and costs may differ for various kinds of bribery. Small companies are more likely to be forced to engage in the act of bribery, but bigger companies might intentionally engage in bribery. “Utilizing a large, cross-country survey sample involving 2,686 firms in 48 countries, we find that firms choose a higher level of bribery when embedded in under-developed market-supporting institu- tions. After controlling for endogenous bribery choices, bribery hurts firm growth for small and medium-sized firms, but not for large firms” (Zhou & Peng, 2012).

Bribery is measured by the frequency of extra unofficial payments to officials to “get things done”. Thus it is positively related to firms’ bank debt ratios, which provides evidence that bribing bank officials facilitates firms’ access to bank loans (Fungáčová et al., 2014). This impact differs with the maturity of bank debt, as bribery contributes to higher short-term bank debt ratios but lower long-term bank debt ratios. Institutional characteristics of the banking industry influence

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the relation between bribery and firms’ bank debt ratios. Advanced levels of financial growth com- pel the optimistic consequences of bribery while larger market parts of state-owned banks have the reverse effect. Foreign bank presence also affects the impact of bribery, albeit this effect depends on the maturity of firms’ bank-debt.

The main challenge in combating bribery as an unethical business practice is to ensure the compliance and commitment of firms with the current laws and regulations addressing this is- sue. One of the ways to achieve that end is to turn to the media in order to shed some light on the problem. In fact, efforts carried out by govern- ments and NGO’s alike recruiting the media and eliciting its support in fighting bribery through media awareness campaigns can prove useful in curbing the problem (Weber & Getz, 2004). Another step in fighting bribery would be to encourage and empower individuals who have witnessed a bribery act to come forth to the rel- evant judiciary channels and report what they’ve encountered (Weber & Getz, 2004). Another way that firms can combat bribery is for companies to “form an association that would improve their collective bargaining position and reduce their vulnerability to government bribe solicitations” (Chen et al, 2008). This is particularly true for firms who rely heavily on government infrastructure as well as exporting activities (Chen et al, 2008). Moreover, firms could “apply pro-transparency pressure on the government by soliciting the help of media or non-governmental anti-corruption ‘‘watch-dog’’ organizations. Public coverage of suspected or actual government corruption would provide incentives for government officials to be more careful about demanding bribes from firms” (Chen et al, 2008).

CONCLUSION

Corruption has a value and is giving happiness to the greatest number of people. Corruption is a behavior and may have become a tradition in

every sector of Beirut Port; officials from the lowest level until at the highest level, namely the executive and every citizen, agent, broker, officer, employees, manager working at the port, doing business in the port. All are acting utilitar- ian. Utilitarianism is the credence that the worth of something is dogged by its usefulness and it is the ethical theory that all activities should be focused on attaining the utmost contentment for the utmost number of people.

The proposed solutions include the full scope of reforms that should be made in Lebanon or in any third world country that has as high a level of corruption as we do here. However, on an interna- tional level, we can say that most developing and developed countries have already implemented most of these recommendations. They come in gradual stages of implementation, in order to familiarize the political system, the offices and the citizens to it little by little: an application of them all at once in a country would cause chaos and rebellion to change rather than order.

REFERENCES

U4 Partner Agencies. (2009). Corruption glossary. U4 Anti-Corruption Resource Centre.

Baughn, C. S., Bodie, N. S., Buchanan, M. S., & Bixby, M. S. (2010). Bribery in international business transactions. Journal of Business Ethics, 92(1), 15–32.

Chen, Y. S., Yaşar, M. S., & Rejesus, R. S. (2008). Factors influencing the incidence of bribery pay- outs by firms: A cross-country analysis. Journal of Business Ethics, 72(2), 231–244.

Daily Star. (2009). Justice minister fires magistrate for bribery. The Daily Star.

Ferrell, L. S., & Buchanan, M. A. (2006). Torch awards for marketplace ethics: Providing students “hands on” experience with marketing ethics. Marketing Education Review, 16(1), 47.

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Fungáčová, Z.S., Kochanova, A.S., & Weill, L.S. (2014). Does money buy credit? Firm-level evi- dence on bribery and bank debt. BOFIT Discussion Papers, (7), 1-40.

Lay-Person’s Guide to FCPA. (2009). Foreign corrupt practices act (FCPA). Author.

LTA & Transparency International. (2009). Plain language guide. The Lebanese Transparency Association.

LTA & UNDP. (2008). Towards a national anti- corruption strategy. Beirut, Lebanon: Author.

Maton, J. S. (2010). The UK bribery act 2010. Employee Relations Law Journal, 36(3), 37–45.

McKinney, J. S., & Moore, C. S. (2008). Interna- tional bribery: Does a written code of ethics make a difference in perceptions of business profession- als. Journal of Business Ethics, 79(1/2), 103–111. doi:10.1007/s10551-007-9395-3

Mihai, B. S., & Alina, A. S. (2013). Business ethics implementation in the organizational culture of companies. Annals of the University of Oradea. Economic Science Series, 22(1), 44–53.

Schubert, S., & Vree, M. (2009, March 13). The international fight against bribery. Soni Motors Thailand. Retrieved from www.sonirodban.com/ thailand-top-car-exporter-to-lebanon

Tenbelian, V.S. (2001, November). Resorting to court when business turns to displeasure. Lebanon Opportunities.

Transparency International. (2009). Combating corruption in judicial system (Advocacy Toolkit). Author.

United Nations Development Program. (2008). Tackling corruption, transforming lives: Accel- erating human development in the Asia and the Pacific. New Delhi: Macmillan.

US Department of Justice. (2007). Foreign cor- rupt practices act (FCPA): Fraud section. US Department of Justice.

Verschoor, C. (2013). Complying with the foreign corrupt practices act. Strategic Finance, 95(4), 15–61.

Weber, J. S. (2007). Bribery: Not only wrong, but costly too? The Academy of Manage- ment Perspectives, 21(3), 86–87. doi:10.5465/ AMP.2007.26421242

Weber, J. S., & Getz, K. S. (2004). Buy bribes or bye-bye bribes: The future status of bribery. Academic Press.

Zhou, J. Q. (2012). Does bribery help or hurt firm growth around the world? Asia Pacific Journal of Management, 29(4), 907–921.

KEY TERMS AND DEFINITIONS

Bribe: Illegitimate payment of money or gifts in return for favoritism and better treatment in matters that may or may not be legal.

Embezzlement: Financial blackmail drawing funds from victims who may or may not be aware of being victimized.

Grease Payment: Small amount side payments that produce faster processing and better treatment in matters which are usually legitimate.

Scandal: Widespread awareness of illegal practice resulting in a negative reputation.

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http://dx.doi.org/10.1007/s10551-007-9395-3

http://www.sonirodban.com/thailand-top-car-exporter-to-lebanon

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APPENDIX

Learning Objectives

L.O.1: Define bribery and bribe. L.O.2: List the most common types of bribery.

Summary

Define Bribery

Bribery, in itself, is a term that is described as the attempt of offering, promising, giving, accepting or soliciting of something else of value to an individual or company in return for an illegal action or a breach of trust such as an attempt to sway a view, opinion, or decision in a direction or another. These inducements made are called bribes: they are usually described by the broadly construed term “anything of value”, which consists not only of monetary rewards and cash equivalent but also of favors such as gifts, discounts, entertainment (drinks and meals), transportation and lodging benefits or even promises of future employment.

List the Most Common Types of Bribery

The most common types of bribery are bribery by/of a public official, bribery by/of a witness, bribery of a foreign official.

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Chapter 18

DOI: 10.4018/978-1-4666-7254-3.ch018

Piracy of Intellectual Property Rights and

ABSTRACT

Originators of books, songs, or movies spend a lot of time, effort, and money to come up with their creative work. In order to protect the value of their production, they issue a copyright. This copyright entitles them to benefit from profits (royalties) and at the same time prohibits others from illegal reproduction without permission. From an ethical perspective, the impact of piracy affects a number of stakeholders such as consumers, artists, and government. Consumers benefit from low prices and suffer when they find out that they have purchased a poor quality product from online websites or when they do not receive the products they paid for. Artists or producers suffer as they are deprived from collecting their royalties. This negatively affects companies due to losses in revenues. Governments are incapable of collecting taxes from the revenues. A number of solutions are available to combat piracy. This chapter explores intellectual property rights and copyright infringement.

INTRODUCTION

Copyright is a form of protection grounded in the U.S. Constitution and granted by law for original works of authorship fixed in a tangible medium of expression. Copyright covers both published and unpublished works. Copyright protects unique works of authorship including literary, dramatic, musical, and artistic works, such as poetry, novels, movies, songs, computer software, and architecture. Copyright does not cover facts,

ideas, systems, or methods of operation, although it may protect the way these things are expressed.

The difference between copyright, patent and trademark is that copyright protects original works of authorship, while a patent protects inventions or discoveries. The way these are expressed may be covered by copyright. A trademark protects words, phrases, symbols, or designs differentiating one business from another. Intellectual property is classified into three different categories:

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1. Creative Works: Include music, movies, books and software and are therefore pro- tected by copyrights;

2. Inventions: Protected by patents; 3. Brand-Name Products: Protected by

trademarks.

Originators of books, songs, or movies spend a lot of time, effort and money to come up with this creative work. In order to give value for their production, they issue a copyright. This copyright entitles them to benefit from the profits (royalties) alone and at the same time prohibits others from illegal work reproduction without permission.

BACKGROUND

Throughout history, humanity has been known for having diverse characteristics that have shaped the structure of this world. This resulted in many inventions and discoveries that were stolen from talented minds. So what does copyright actually protect? According to dictionary.com, copyright is “the exclusive right to make copies, license, and otherwise exploit a literary, musical, or artistic work, whether printed, audio, video, etc”.

The form of securitization was never always provided until the emergence of the copyright con- cept in the 18th century (1709), when King Charles the Second was worried about the illegal copying of written artwork. In addition to governmental and religious organizations, copyright was also essential in the birth of capitalization and in the creative human activities, such as literature works and artistic creations. Back then, various cultural behaviors, social entities, and legal structures led to the creation of copyright in Europe but not in other regions. After capitalism came into effect with its individualist ideological foundation, copyright expanded, especially in Europe.

The “Statute of Anne” was the first copyrighted act, and it extended from just books and maps to basically every modern business, protecting such items as sound recordings, films, photographs, software, and architectural works. After the United States adopted Copyright and included it in its Constitution, some of the States amended cer- tain copyright laws between 1783 and 1787. The Copyright law stated: “To promote the progress of science and useful arts by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries”. This law gives the right to the owner to be able to make profits for a certain period of time. The length of the copyrights in the US was up to 14 years. Also, the author could extend this period by applying for other periods of 14 years.

The introduction of the copy machine in 1779 and of computers in the 20th century was a major threat. The internet was also just another means through which people were able to connect and share various data with large numbers of people. This caused uproar among authors, as well as many artists who were worried about the theft of their work. Working hand-in-hand, people urged sovereign powers to regulate this issue and provide a safety measure to prevent people from using this sort of information illegally. This transition managed to find its way into our world today. A recent example would be that of the masterminds behind the idea that was allegedly stolen, Facebook. Divya Narendra and his partners, accused Mark Zuckerberg of stealing their idea of Facebook (Gadgets Hunt). Had this group of people copyrighted their idea, they would have been able to join the Facebook group of young billionaires today and would have never lost it to someone else.

Today, the proper definition of copyright ac- cording to the US Copyright Office is “a form of protection grounded in the U.S. Constitution

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and granted by law for original works of author- ship fixed in a tangible medium of expression. Copyright covers both published and unpublished works.” (US Copyright Office). Copyright protects unique works of authorship including literary, dramatic, musical, and artistic works, such as poetry, novels, movies, songs, computer software, and architecture. Copyright does not cover facts, ideas, systems, or methods of operation, although it may protect the way these things are expressed.

The difference between copyright, patent and trademark is that copyright protects original works of authorship, while a patent protects inventions or discoveries. The way these are expressed may be covered by copyright. A trademark protects words, phrases, symbols, or designs differentiat- ing one business from another. A work is under copyright security by the time it is created and made tangibly detectable.

Regarding the subject of an online website, the original authorship appearing on a website may be protected by copyright. This includes writings, artwork, photographs, and other forms of authorship protected by copyright. Copyright law does not protect domain names. Names, titles, slogans, or short phrases are not protected by copyright law. Some names may be protected under trademark law.

Copyright does not protect ideas, concepts, systems, or methods of doing something. Publi- cation is not necessary for copyright protection.

DEFINITION OF PIRACY

According to law, piracy is considered to be an act of stealing intellectual property. It is a form of theft which leads someone who is unauthorized to engage in the act of copying or using intellectual property. Intellectual property is classified into three different categories:

1. Creative Works: Include music, movies, books and software and are therefore pro- tected by copyrights;

2. Inventions: Protected by patents; 3. Brand-Name Products: Protected by

trademarks.

It is important to distinguish between intellec- tual property and physical property. For example, a regular DVD, which is a physical property, has no value unless it has a produced movie (intellectual property) saved on it. Therefore, when a person buys a DVD from the store, this does not make him the owner of that DVD because someone else owns it or has the copyright to the music saved on the DVD.

Why do intellectuals copyright their work? Originators of books, songs, or movies spend a lot of time, effort and money to come up with this creative work. In order to give value for their production, they issue a copyright. This copyright entitles them to benefit from the profits (royalties) alone and at the same time prohibits others from illegal work reproduction without permission. Therefore, it is unethical or immoral to steal or make use of the efforts made by others without giving them credit or reimbursing them.

Furthermore, it is necessary to differentiate between physical piracy and internet piracy. Physi- cal piracy is when an unauthorized person copies and distributes (sells illegally) a hard copy of CDs, videotapes and DVDs. This process would require the pirate to make small investments whereby he/ she purchases a number of blank videotapes or CDs to make the copies, which take some time to complete. On the other hand, internet piracy is when a person transfers music and movie files into digital format which then allows internet users to make copies of these files. Therefore, through the internet, millions of copies can be obtained by users instantly with absolutely no

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costs since online pirates incur no development costs as physical pirates do. As a result of this, the main cause of piracy nowadays is the internet. This, simply, is because the use of internet allows people to download and distribute unauthorized copies of intellectual property such as music, movies, software and games instantly.

Dynamics and Intricacies of Piracy

Piracy is a broad topic and branches a lot when it comes to its types and practices. What make piracy an unethical act is the conflict between original sources and publishers and people who need access to those sources. Originators of intel- lectual sources spend a lot of time and effort on their work which they consider a “piece of art”. Thus they believe it’s their right to gain royalties or get compensated for this effort. What makes it unfortunate for users is that this compensa- tion comes only in a monetary form (premium). Users who are in need for that source and have no other choice had to search for an alternative. Unfortunately for originators, that source came out to be piracy.

From an ethical perspective, the impact of piracy affects a number of stakeholders such as the consumers, the artists and the government. Consumers can be positively or negatively af- fected. They can be positively affected only when it comes to price because counterfeit products cost much less than original ones. However, most consumers suffer when they find out that they have purchased a poor quality product from online websites which they were not aware of at the beginning. Others suffer when they actually never receive the products they paid for from illegal websites and even if they do receive them, they are unable to get their money back after discovering that they are pirated ones. Artists or producers suffer from this act as they are deprived from collecting their royalties. This negatively affects companies because due to losses in revenues, they

cannot afford to invest money back into businesses to try and offer consumers a wider selection of products. Moreover, the government also endures from this issue because it is incapable to collect taxes from the revenues generated by companies. This happens because when pirates sell illegal software, money goes to them only as they pay no taxes (Ghillyer, 2010).

Governments are trying to reinforce more acts and pass more laws to limit the act of piracy. However, what is really happening is that govern- ments are trying to “polish” the act of piracy by making it look more legitimate. At least it will be difficult to implement those laws and policies when two thirds of university students believe in the ethical act of exchanging files downloaded from the Internet free of charge and half think it is tolerable at the work life (Buchanan, 2006).

The pressure the public is putting on the originators forced them to come up with new ideas suitable for making piracy look more “of- ficial” on the Internet. Online music stores such as iTunes (Apple Company) started the service of offering its customers music and movies for a minimum cost of $0.99. What makes it appear as ethical more than other illegal music stores is the mere fact that the songs or movies are paid for. People are willing to pay for those services because they get what they want for a low cost and have the feeling of doing a legal and ethical act (eNotes.com, 2009).

FACTS AND FIGURES

Examining Table 1, it is apparent that industry losses due to piracy increased from 2001 to 2005 and thus the level of piracy is at a severe point (65%-80%) between different intellectual prop- erty categories. It is inferred that piracy is out of control and the dynamic increasing trend will put more pressures on the lacking governmental boundaries (Data Bank).

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Based on the numbers in Tables 1 and 2, we can also infer a cultural perspective about piracy. Regions such as North America and Europe are cultures against piracy though they have percent- ages between 20 and 35. In those cultures, salaries are relatively high and laws are strictly enforced. As a result, people can afford buying original copies and respect the law because they are aware of the severe consequences of breaching those policies. However, regions such as MENA and Latin America have piracy percentages ranging between 55 and 70. Those regions relatively have low incomes and laws are not strictly enforced. As a result, people can’t afford buying original cop- ies with sky rocketing prices of original material.

Further, the fact that laws are weakly implemented encourages the citizens to get engaged in piracy.

The statistical analysis of the study results showed that increased personal wealth has resulted in a decline in software piracy rates worldwide. The hypothesis suggests that “as people become richer, they become more individualistic, and the combination of these two effects result in the tendency to buy legal, rather than pirated copies of software, even in countries that traditionally have high software piracy rates” (Moores, 2003).

In Table 2, loss figures classified by regions clearly shows the increasing trend of losses due to piracy over the years. Forecasts show that the trend is not going to slow down as more and more

Table 1. Estimated trade losses due to copyright piracy

2005 2004 2003 2002 2001

Loss Level Loss Level Loss Level Loss Level Loss Level

Records and Music 3.2 0.75 3.0 70% 2.5 70% 2.0 65% 2.0 65%

Business Software 17.9 0.75 15.0 75% 14.0 74% 3.5 74% 1.1 79%

Books 4 NA 3.0 NA 2.0 NA 2.0 NA 2.0 NA

Entertainment software NA NA NA 75% NA 80% NA NA NA NA

Motion picture NA NA 10.0 80% 10.0 80% 8.0 80% 8.0 80%

Totals 25.1+ 31.0 28.5 15.5 13.1

Source: International Intellectual Property Alliance.

Table 2. Worldwide piracy rates and losses

World Regions 2005 2004 2003 2005 Losses ($ Millions)

2004 Losses ($ Millions)

2003 Losses ($ Millions)

North America 22% 22% 23% 7,686 7,549 7,243

Western Europe 35% 34% 36% 11,825 11,856 9,604

European Union 36% 35% 37% 12,048 12,151 9,786

Asia Pacific 54% 53% 53% 8,050 7,897 7,555

Middle East/Africa 57% 58% 56% 1,615 1,239 1,018

Central/Eastern Europe 69% 71% 71% 3,095 2,615 2,111

Latin America 68% 66% 63% 2,026 1,546 1,262

Worldwide 35% 35% 36% $34,297 $32,711 $28,803

Source: Business Software Alliance.

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online “lawful” music stores open (similar to the iTunes concept). In year 2005, the level of piracy was 57% in the MENA region (Data Bank).

Piracy levels differ across cultures. Hofstede is the originator of five main cultural dimensions: power distance, uncertainty avoidance, long term versus short term, masculinity versus femininity, and individualism versus collectivism. Hofstede’s dimensions were obtained from a survey conducted on over 72,000 IBM employees in 40 countries between1967 and 1973. All four dimensions are based on questions related to work values. To prove the relation of piracy levels to cultural differences, Hofstede’s cultural dimensions scores, software piracy rates, and economic wealth obtained from World Bank’s World Development Indicators 2001 were replicated together to generate the relation- ship between culture and piracy levels.

Although many organizations were incepted to battle with piracy and decrease its levels, the model here showed a variance of 80% and thus left a low percentage to attribute or associate with the acts of such organizations. Thus, a clear conclu- sion can be made in which variance is attributed to the cultural scores and economic wealth. The problem here is associated with the Internet and the national boundaries. When Internet is used to rotate pirated material, pirates become anonymous and difficult to grab hold of as the issue transcends national boundaries. Although economic wealth and individualism lead to a decrease in the piracy rates particularly software, this happened only on a national level. The Internet will continue to have high probability to cause piracy and the case should be tackled in a different study (Moores, 2003).

GENERAL HISTORY OF PIRACY

Internet piracy became a critical issue when it started up Napster in May 1999, thus gaining national attention worldwide. Napster was an online music service that enabled users to share

and download digital music files. It did so through the use of peer-to-peer (P2P) networks, which basically allows users to link their computers to other computers on the network and share files. By July 2000, Napster had more than 20 million users on the network and all of them were making copies of each other’s music files. Many users of Napster thought that downloading songs were just means of sharing files and that they were not engaging in piracy or theft. The music industry, on the other hand, disagreed. “What Napster is doing threatens legitimate E-commerce models and is legally and morally wrong”, said Hilary, who was the president of the Recording Industry Association of America, (RIAA). According to the music industry, Napster was giving users ac- cess to unlimited songs for free which it perceived to be unethical and wrong. Therefore, it filed a lawsuit against Napster and it shut down in July 2001. Because of this, other file sharing services came into play, one of which was Kazaa, created in the late 2003. Kazaa among other file-sharing services allowed users to share movie, music and software files. These services, unlike Napster, had more decentralized P2P networks which explain why they were not eliminated easily by shutting down a number of servers as was done with Napster. Therefore, instead of tracking the P2P network, the music industry focused to track on individual file sharers. For example, in September 2003, the RIAA filed lawsuits against Kazaa us- ers who were sharing copyrighted work with one another and were subject to stiff penalties costing thousands of dollars for every illegally shared file (eNotes, 2009).

The problem of internet piracy is not that simple and it will never stop by just making us- ers pay penalties. This is because over 2.6 billion music files are being downloaded through P2P networks every month, and over four hundred thousand movies are being downloaded every day. The main reason for this is of course the Internet. Computers and the internet have provided us the

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convenience of communicating and transmit- ting information to other people in seconds. As a result of this, intellectuals are destined to lose their copyrighted works easily because they are incapable of controlling who has the ability to access and copy their work.

The Internet is not only used to share or download music and movie files, it is also used by pirates for installing unauthorized computer software. The Software and Information Industry Association (SIAA) states that software are new forms of intellectual property and that those who are involved in the unauthorized copying, distribut- ing and selling of those software are engaging in copyright infringements of in other words software piracy. Like music and movies, computer software is protected by issuing copyrights to their own- ers and those who illegally make copies of them are liable for punishments and huge amounts of penalties. It is a fact that when people purchase computer software, they also tend to purchase license agreements along. These agreements mention the terms and conditions required for the appropriate and legal use of the software. It is also important to consider that license agreements differ from one software to another because some software authorize one individual or computer to use it, whereas other software authorize a number of individuals or computers for use. Once the legal limits are used up, users are no longer authorized to use the software again and make a number of copies out of them. However, if they do, they are violating the law and the license agreements. This of course is wrong and unethical because most software pirates who engage in this act tend to dismantle software companies from their earnings and profits. Moreover, they are prohib- iting the creative R&D software teams, such as the programmers, writers and graphic designers from doing their jobs because their rights are be- ing taken away from them. This eventually leads to losses which negatively impact all software industries. Due to these losses, intellectuals are short on money resources to dedicate to R&D

in the development of new software products. They are also incapable of lowering down the prices for the customers. As mentioned earlier, the most growing type of piracy nowadays is the internet and it is becoming a difficult problem to combat. Once software pirates come up with unoriginal copies of software by burning them on to CDs, they are selling them on online auction websites, whereby they distribute these copies to a big number of customers by mail and in return generate huge amounts of profits (eNotes, 2009).

GENERAL DEFINITION OF COPYRIGHT

Copyright is a privilege given to the owner to put limitations to his work. That way, his work cannot be exercised by anybody else without his permission. It is these rights that give copyright owners the ability to control how their work is used, through licensing, and in many circumstances, others can profit from the use of the copyrighter’s work legally. Usually, when somebody other than the copyright holder does any of those rights with- out consent, the copyright has been overstepped or despoiled. It is vital to comprehend that not all doubling from copyrighted works institutes violation.

Certain parts of copyrighted works may be imitated legally without the copyright owner’s consent. For example, ideas found in a copyrighted work can be imitated because ideas are not pro- tected by copyright. The user can paraphrase the idea or elaborate it in the user’s own way. Never- theless, the line between allowable copying and copyright infringement is not constantly very clear.

Copyright infringement happens when a copyrighted work is replicated, spread, performed publicly, exhibited or made into an imitative work without the consent of the copyright owner.

Copyright may apply to a wide range of cre- ative, intellectual, or artistic forms, or “works”. Specifics vary by jurisdiction, copyright theft or

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piracy can include poems, theses, plays, other liter- ary works, movies, dances, musical compositions, audio recordings, paintings, drawings, sculptures, photographs, software, radio and television broad- casts, industrial and graphic designs. Copyright does not cover ideas and information by itself, only the form or manner in which they are expressed. Take Mickey Mouse cartoon copyright as an ex- ample, this copyright limits others from making copies of the cartoon or making derivative works based on Disney’s particular cartoon mouse, but does not prohibit the creation of other works about other mice in general, so long as they are different enough to not be judged as copies of Disney’s.

PIRACY IN LEBANON

Piracy is a big problem in Lebanon not because there are no copyright laws set by the government but because the laws are not being implemented or applied properly. The Lebanese parliament enacted several laws in the year 2000 concerning intellectual property and copyright problems. Those acts were reinforced in successive years; however, the main problem is their mismatch with international policies, weaknesses in key areas and difficulty in implementing them in Lebanon, (Oxford Business Group). For this reason, the cost of copyright infringements in Lebanon is high whereas the revenue of Lebanese copyright owners is at a decline. There is no clear cause for triggering piracy and counterfeit products in Lebanon. However, Internet is the main trigger- ing cause of piracy. Before the penetration of the internet into the Lebanese society, there were no photocopied books nor were there any unoriginal copies of products. For example, people of whom we know such as cousins, and uncles, used to buy original university books for high prices. Moreover, teenagers used to pay $20 to $30 to buy CDs of artists they like. As the internet ad- vanced and was permitted into the daily lives of teenagers, piracy began and increased gradually.

Photocopy machines made it easier and cheaper for students to get their books especially that most of them don’t keep after graduation. Music web- sites made it easier and faster for music lovers to download hundreds of songs per day. In addition to this, most internet companies don’t “debit” the downloaded quota of subscribers between 11 pm and 6 am. As a result, people are almost getting movies or songs for free.

In Lebanon, copyright infringement practices contribute to US$165.78 million of value added to the Lebanese economy. Unfortunately, these practices have classified Lebanon among the countries that do not respect copyright laws al- though the government tried to protect these laws by the following:

• On March 1, 1943, the first Lebanese Criminal Code was promulgated.

• On July 17, 1959, Lebanon joined the Universal Copyright Convention (UCC) adopted in Geneva in 1951.

• On June 26, 1962, Lebanon signed the Rome Convention for the Protection of Performers.

• On November 20, 2006, the Lebanese Government signed the Trade and Investment Framework Agreement with the US Government.

However, the real problem is in implementing these laws. Copyright infringements have been noted in the following sectors:

Music

The music industry in Lebanon is one of the most flourishing sectors with its pool of talent, availability of professionals, and reputation of its singers. However, some well-known Lebanese

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songs have either stolen the music from foreign countries or translated the lyrics of other songs. For example, the Lebanese Arabic song ‘Ashtany’ for Najwa Karam from her album ‘Rouh rouhi’ was copied from the Greek song ‘Aksar is duniya mein’. Even the Lebanese National Anthem has been plagiarized from a song dedicated to Muham- mad Ibn ‘Abd al-Karim al-Khattabi.

Movies and Video Games

In Lebanon, a lot of stores are selling copied movies. Although the government has destroyed over 5 million copied DVDs in 2010 and closed more than 20 stores that sell these DVDs in Beirut, these stores still exist. For example, a well known original DVD rental store called ‘DVD Base’ in Beirut started to sell copied DVDs because people would prefer to buy a copied DVD for 3$ that renting an original DVD for 2$ for a single day. If the government role in fighting infringement was significant, we won’t see such stores in Lebanon.

Scholastic Books

One of the most sectors that contribute to copyright infringement Lebanon is the photocopied books. A lot of students prefer to photocopy original books so they can save money. For this reason, a lot of stationary bookstores started to sell photocopied books. The government in Lebanon does not control this because any person can photocopy anything anywhere. This practice is a significant infringement of copyright laws. As a result, some well known book publishers are not selling their products to Lebanon because they know that their book will be photocopied and they will incur losses due to the absence of laws and policies to protect them.

Case of Copyright Infringement

Selling illegal copyrighted software has been an example of real cases of piracy for many years,

one of which happened in Lakeland, Florida in the end of 2002. This man sold a vast number of software such as Adobe, Autodesk, Photoshop 7, and Illustrator to name a few by advertising the sales on popular search engines. By 2005, he was tracked by BSA (Business Software Alliance) and caught by FBI after gaining a profit of $4.1 million by selling them on www.buyUSA.com. When customers ordered this software online, the pirate reproduced that software on CDs and distributed them by regular mail. As for now, he is regretful and advises everyone not to commit such an act because in the end, it is a crime and those engaging in it would be caught and suffer severe consequences (BSA, 2009). This case among many others has been justified by the fact that those who get involved in them believe that the acts are considered safe and that no one will get caught (The Classic crime- and Punishment Issue of Discovery).

The ethical theories behind this case include:

1. Utilitarianism, 2. Universalism, 3. Legality, and 4. Morality.

The concept of utilitarianism is applicable because this act was created to offer customers a wide variety of software at reduced prices. (The ends justify the means regardless of the actions involved). The universalism concept is applicable because the piracy act is considered to be illegiti- mate and unethical by most countries and people in the world. The Legality concept is also applied because many countries are trying to enforce their laws regarding piracy and anyone who commits piracy is considered to be a criminal. Such laws include but are not limited to copyrights, patents, trademarks, and intellectual property acts. The last concept, morality, is also applied because piracy is considered an immoral act in the sense that people who engage in it are depriving owners from their legal and right earnings. The golden rule

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http://www.buyUSA.com

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states: “Do unto others as you would have them do unto you.” From a personal point of view, you don’t want others to get credit on your behalf and vice versa (Ghillyer, 2010).From a stakeholder’s perspective, the suspect was affected by a bad reputation and he lost his family and friends as well as his freedom. Consumers consider him to be a criminal although his pirated software was meant to help them save money. The originators of the software got rid from a person causing them a nightmare. They will sell original software and secure their royalties. Also the government will earn taxes from the legal sale of originals.

Piracy in Lebanon

A survey of 200 people was conducted via Face- book to understand people’s views on piracy and its current level in the Lebanese culture. The fol- lowing results are based on the questions about how people obtain their products. Three sources were considered: pirated, original, and both. The respondents have different backgrounds and different universities. Some are undergraduates, others are graduate students, and there are some respondents from the domestic and international work. Survey results are indicated in Table 3.

Table 3 assumes that 95% of those who bought pirated products considered purchasing pirated material for the simple reason of having lower prices for the same quality. The remaining percentage said that it is another option for them when delivery of those original copies is delayed. 90% of those who bought pirated products didn’t consider changing their behavior later on, because

they simply stated that no laws are enforced in Lebanon and that everyone is doing the same thing. 5% of those that bought pirated products said that they might change their behavior if prices of original products are lowered. The remaining 5% answered that they are trying their best to change their behavior since they are working in software companies and they are seeing how their company is losing. One final conclusion can be inferred; this conclusion is lack of awareness. Students mentioned that they don’t really believe that piracy is a crime and they lack enough aware- ness to recognize its seriousness.

The Lebanese Government passed a number of laws to protect intellectual property. The Patents Law of Lebanon (Law number 240) is a law with several articles discussing how to obtain a patent and pay for it. In the mentioned law above, the patent fees range between L.L. 25,000 to L.L. 125, 000 (Ministry of Economy and Trade). These fees are very minimal compared to other countries in the world. Other similar laws are present to protect copyrights (Data Bank). However, the main problem is not in passing those laws but in enforcing them. There is no follow up from the government. Although police are confiscating pirated disks and products, they are only eliminat- ing a small percentage of the pirated material in the market (AFP, 2009). Moreover, the fees that the violator has to pay in case of breaching the copyright law are very minimal and don’t stop him from committing the act again. This is because the violator’ profits from pirated products outweighs the violation fees. If in case the violator is caught by the government, his “Wasta” and bribery skills are enough to help him escape the seriousness of the problem.

The piracy problem in Lebanon has caused the community severe losses. Piracy losses have shown an increase from 22 million dollars in 2003 up to 26 million in 2004 and reached 34 million dollars in 2005. The awareness of citizens about the seriousness of piracy and the gradual enforce- ment of laws by the Lebanese Government lead to

Table 3. Current state of piracy in Lebanon’s market

Original Pirated Both

CDs 10% 75% 15%

Books 60% 20% 20%

Computer Software 15% 85% 0%

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a 2% decrease in the piracy level from 75% in 2004 to73% in 2005. As a result, Lebanon has dropped out from the list of top 20 countries having the highest piracy rates (Business Software Alliance).

Although Lebanon’s piracy rate has been decreasing since the year 2005, its impacts on the government and the stakeholders are still disastrous. Cinemas, videos, software, and DVD stores are victims of piracy in Lebanon. For example, the Director of a local Cinema chain, stated that the revenues of the cinema industry have decreased by 50% in 10 years because pi- rated videos and DVDs are not only limited to old movies but also to the ones currently showing in the cinemas . According to the International Intellectual Property Alliance, 50% of products are copied and sold openly. “This situation is one of the main factors hindering Lebanon from joining the World Trade Organization,” said the head of the economy ministry’s office for the protection of intellectual copyright (AFP, 2009). The apparent situation has caused one of the big- gest software companies in the world, Microsoft, to reconsider its decision of opening a branch in Lebanon. This is disastrous since the situation is deterring international firms to enter Lebanon’s market. Also Lebanon is known to be one of the highest publishers of books in the Middle East, and this is by itself contradictory because we are encouraging the originators to issue books in our region and at the same time we have one of the highest piracy rates in the region.

The Lebanese National Anthem Controversy

The Lebanese National Anthem is written by Rashid Nakhle and composed by Wadih Sabra. It was implemented on 12 July 1927, seven years after the declaration of the state of Greater Lebanon during the French mandate. The Lebanese national anthem was selected according to a competition held between several writers and composers. In

10 June 1927, Rashid Nakhle won this competi- tion and his writing was adopted after several modifications. Another competition was held after the first one, in order to compose the music of the anthem. Wadih Sabra won this competition. The music of the national anthem is prejudiced by Beirut’s exposure to western culture and was also composed by French trained artist Wadih Sabra. This background information about the Lebanese National Anthem shows that it was an individual work which explains and copyright infringements that would be discovered in the future.

A local Lebanese TV channel showed in 2011 a mini documentary on the Lebanese National Anthem, stating that the music has been copied from a song dedicated to Muhammad Ibn ‘Abd al- Karim al-Khattabi, the leader of the Rif Republic, non. For example, the Director that was composed by the Lebanese composer Mohammed Flayfel. The issue caused a lot of panic especially for the political leaders in Lebanon. And people started saying that “how come you want us to stop pla- giarizing and to respect copyright laws when our national anthem is a clear copyright infringement”. Several political leaders started investigating this claim. They compared the dates of the Lebanese National Anthem composition and the date of the song that is dedicated to Muhammad Ibn ‘Abd al- Karim al-Khattabi. Unfortunately, they found out that the latter was composed in 1924 which means that it was written before the Lebanese National Anthem. As a second step, investigators started to compare the lyrics and the music of both songs. No relation between the lyrics was found; however, there was an obvious relation between the music of both songs. The orchestral music seemed to be the same. Moreover, the piano notes in both songs are identical in almost all notes. However, it was shown that the length of the music in both songs is different. The Lebanese National Anthem is 30 seconds longer with no inconsistency in music which keeps some hope that the music was close by some kind of coincidence.

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All in all, no clear conclusion was reached. The TV station later showed another documen- tary containing documents that disprove the claim. However, the documents were clearly not persuasive and it showed that the TV was forced to close the subject and withdraw its claim. The Lebanese can only hope that their national anthem is a genuine one because if not, this would be a shame and a definite moral dilemma for a lot of Lebanese people who believe that the anthem is what unites them under one flag. The national anthem should be a symbol for the nation, good citizenship, nationhood and a sign of faith and having belief in the country and in its army. If it were true that the Anthem is plagiarized then it’s not worth living in a country in which the latter doesn’t respect the copyright laws. How should Lebanese citizens feel that their work and pro- ductions are safe against plagiarism when their national anthem is plagiarized?

If the Lebanese National Anthem was really plagiarized from the song dedicated to Muham- mad Ibn ‘Abd al-Karim al-Khattabi, the problem would have started with Wadih Sabra at the competition. At the time, the Lebanese officials should have investigated on whether the nominated music tracks were genuine or plagiarized. It is the government fault because it is strictly liable in such matters that concern the public and the future of the country. However, the TV station practiced what is so called “whistle blowing” in order to highlight on the subject or for other media reasons. One of the most important conditions of whistle blowing is that the party in concern should investigate before blowing the whistle. It was clearly noticeable that the station failed to do this because it republished a documentary denying the first one. As if it were saying that no enough evidence supports the subject. Moreover, another ethical issue arises if it was true that the Lebanese Authority decided to unshed lights on the topic. If this is true then the Lebanese gov- ernment followed the utilitarian way in solving the complication. The government weighted the

consequences of admitting that the Anthem was plagiarized thus causing a big national problem versus the consequences of closing the subject. In this case, the government sacrificed in the favor of the greater good to the greater number of people. We believe that this is the best case scenario if our national anthem was plagiarized because we wouldn’t like to be regarded in an inferior way by foreign countries and if the government didn’t do this then a lot of our valuable Lebanese publica- tions will also be threatened by accusing them to be plagiarized from other countries or works. If all the case was false and the TV station wanted to have a media scoop, then we are facing another ethical dilemma. The ethical issue is “false whistle blowing” is a dangerous act.

INTERNATIONAL CASE OF PIRACY: USA

One of the most popular alternative music bands, produced songs that are considered unique and ground-breaking. This famous band, who has not only won multiple awards but managed to sell over 55 million records worldwide, was accused of plagiarizing some of their music, including their number one song on their number one album. Moreover, this incident was not the first time this band was accused of copyright infringement regarding the same melody. (Doug Panzer, Esq.). According to Billboard Hot 100, the song became the band’s first number one hit (Billboard.com). On December 4th 2008, a multimillion-pound copyright infringement suit against the band was filed in the United States District Court in the Central District of California. The suit states that the song includes “substantial original portions” of an earlier song from a 2004 album. While the implications of such a lawsuit are grave, the severity of the case was exacerbated as the song in question, received two Grammy Awards for “Song of the Year.” The copyright case was finally settled by dropping the claim.

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There are so many diverse melodies in the music industry that the threat in that industry is always present, even placing extreme measures for copyright infringement might not be enough. There are so many songs in the market nowadays that one ought to sound like another. If two songs are similar, it does not mean they are necessarily copyrighted. Most fans appreciate when a band brings a unique fresh variety of songs that to are mesmerizing. However, upon listening to both versions, the similarity is easily spotted. Whether or not this was intentional. Some people make up songs on their own yet they do so having sub- consciously been taking the beat or lyrics from another song they have previously listened to. In that case, the theft is not intentional. It would not be unreasonable to think that a band who has produced this number of highly successful songs would steal a song from someone else.

On a less naïve level however, a stronger reason why it is unlikely that the music was stolen is that if the famous band were to do so, they would not do it for their main hit of the album. Also, when borrowing occurs in music, the scale of material borrowed is limited. However, the similarities be- tween the two songs were profound and ran through the core of both songs. Unless they intended to commit career suicide, it is highly doubtful they did this knowingly. Investigating the accusation of copyright infringement by the famous music band for their number one hit song confirms that nothing goes unpunished. No one is above the law. Regardless of wealth, power, or fame; stealing from another and claiming that to be an original will never go unnoticed. In addition, even though the case was ultimately dropped, the process of being accused and being observed in the public light in a negative fashion is almost as detrimental towards future success and reputation. The final verdict of a case does not necessarily deem the defendant innocent in the public eye and poses as a threat to the popularity of such a band.

Unique and successful works such as the ones mentioned here, or any artistic production for that matter, ought to have clear-cut copyright certifi- cation defining rights and privileges. Procedures like this would save huge sums of money and time spent on lawsuits and subsequent investigations. More specifically, the music industry should conventionalize this process and internalize it, creating mechanisms that work within it to prevent such incidents. Finally, and this is a bit more personal than general, the music award committees must conduct research before making decisions on awards. To give an award to a song which bears such resemblance to another song, without at least an investigation, is shameful to music award committees. Even though it was not a legal issue at the time of the awards, it is the job of committees to be experts on comparison with previous production.

POSSIBLE SOLUTIONS

There are a number of solutions available to com- bat piracy. Bicharaf.org is a student organization that works on different ethical issues and tries to awareness among students and the greater com- munity. One of the activities done by Bicharaf. org to combat piracy is the book exchange fair at different universities. Students having original second hand books are encouraged to swap their books with other original second hand students’ books. This process happens online and in person. This project is targeted to students who cannot afford the price of new original books but at the same time are not willing to buy copies of pirated books (Bicharaf.org).

Another solution in combating piracy is through university initiated programs such as the World Intellectual Property Day that are celebrated every year. This program acts as awareness to the seriousness of piracy and to the potential benefits

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sought if intellectual property (IP) is respected. Renowned Lebanese actors and business owners were the spokes people at the event. They explained how piracy can be detrimental to their work and how frustrating they become as their work gets copied. Companies that participated were: Rotana, Orbit, Adobe, Microsoft, and media firms. The participating firms displayed numerous posters to raise awareness against the economic and legal disadvantages of piracy. The meeting concluded to a goal that was meant to change the perceptions of the students about piracy and how businesses and individuals cannot flourish as long as their work is being pirated (AUB Web Bulletin, 2006).

Technically speaking, another solution could be to control the messages sent across ISPs. This would involve filtering processes into firewalls so as to track the actions of individuals or users who exchange information online. This will help in getting hold of piracy criminals who change or alter software encryptions (TechRepublic, 2005). In addition, the fees paid to the originators must be reduced in order to encourage consumers to obtain legitimate copies. When the consumer per- ceives a slight price difference between copied and original materials, he will be inclined to purchase an original and better quality copy. In reality, the costs of original products decreased over the past three years. People no more pay excessive high prices for encyclopedias and CDs to name a few. Moreover, the internet played a crucial role in decreasing prices since the wide availability of products on the web forced originators to lower prices in order to maintain high sales. As men- tioned previously, offering products like music on the official iTunes website for a minimal fee was another reason for decreasing prices.

FUTURE TRENDS

Recently, piracy became a highlighted topic in the business world due to its ethical controversies.

Governments’ main aim is to reduce losses result- ing from piracy and curtail its consequences on intellectual property and innovation. The World Wide Web was the main initiative to lead people into piracy. This is because the internet facilitates the communication medium between users of the internet and those dwelling on to share copied files.

The piracy issue resulted in positive and negative consequences for many stakeholders. The main stakeholders involved are consumers, governments, originators, and violators. Piracy in the business world highlights many ethical theories behind it, some of which are discussed in the following paper. Mainly, most of the ethical theories discussed consider piracy to be unethical and detrimental.

Lebanon was among the list of the top 20 countries in piracy rates. The increased awareness of the public and governmental efforts led to the reduction of the piracy rates in the country. Still, piracy is dispersed in the different intellectual property material, especially cinemas, books, movies (DVDs), and music (CDs).

Many solutions are available to control piracy. The community and government go hand in hand to combat any pirated activity. UNESCO developed several programs to raise awareness among young generations in making them appreciate intellectual property and innovation.

Global software piracy, a main concern for intellectual property holders, is reflected in the setting of intellectual property rights laws, nation- wide cultural situation, and economic setting. To assess the effect of legal and regulatory surround- ings, the World Economic Forum surveyed leaders in business in the field of intellectual property protection in their country. “Regarding national culture, five (5) dimensions identified by Hofstede are considered. To evaluate the economic impacts, a country’s gross domestic product (GDP) per capita at purchasing power parity is utilized. All three factors were found to be related to software piracy” (Hamister, & Braunscheidel, 2013).

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CONCLUSION

In 2004, UNESCO initiated the Anti-Piracy train- ing for Trainers (APTT) course to inform officials of copyright law enforcement. The purpose of the course was to introduce participants and then the community as a whole to programs combating or reducing intellectual property piracy rates. UNESCO also is interested in raising awareness on the seriousness of piracy among young gen- erations to build cultures of respect. UNESCO is trying to fight piracy and reduce its consequences in order to encourage people worldwide to inno- vate more. One way to do so is through private and public partnerships (UNESCO.org). A last alternative that the Lebanese Government can employ is the report reward program. Through this program, citizens are encouraged to report any piracy case or in the case of deception via a hotline to the government. When they do that, they can get rewarded by the government for bringing that matter up to their attention. Citizens can get a monetary reward. By doing so, citizens feel responsible and aware for the piracy issue and will be motivated to report other cases and tell friends to do so. Also, the Lebanese Government should increase the fees of intellectual property violators. Current fees are very low to discourage violators from repeating their acts. When fees are officially increased, violators will think twice before engaging in piracy.

There are a number of solutions available to combat piracy including:

1. Activities by student organizations. (e.g. Bicharaf.org book exchange fair at universities);

2. University initiated programs. (e.g. World Intellectual Property Day at AUB celebrates which is an awareness day);

3. Control the messages sent across ISPs. This would involve filtering processes into fire-

walls so as to track the actions of individuals or users who exchange information online;

4. Fees paid to the originators must be reduced in order to encourage consumers to obtain legitimate copies; and

5. Training courses about copyright law en- forcement (e.g. UNESCO’s).

REFERENCES

AFP. (2009). Piracy sinking Lebanon cinema, music, cable industry. AFP.

Angry Arab News Service. (2012). Lebanese national anthem plagiarized: Is there anything not fake in Lebanon? Author.

AUB. (2009). Office of grants and contracts celebrates world intellectual property day. AU- Bulletin, 7(8).

Bohlman, S., Herbert, M. S., & Dundas, M. J. (2005). The legal, ethical, & international envi- ronment of business (6th ed.). Thomson South- Western.

Buchanan, L. (2006, March). Pirates inside. Har- vard Business Review.

Business Software Alliance (BSA). (2009). Faces of internet piracy. BSA.

Espejo, R. S. (2009). Opposing viewpoints re- source center. Detroit, MI: Greenhaven Press.

Farshad, M. A. (2007). The role of art in the struggle for national identity in Lebanon. Aca- demic Press.

Ghillyer, A. W. (2010). Business ethics: A real world approach (2nd ed.). New York: McGraw- Hill.

Gibeily, C.S. (2002, November). Just let it burn. Executive.

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Hamister, J. S., & Braunscheidel, M. S. (2013). Software piracy and intellectual property rights protection. Academy of Information & Manage- ment Sciences Journal, 16(1), 15–35.

Info Pro. (2009). Lebanon opportunities. Info Pro.

Moores, T. T. (2003). The effect of national culture and economic. Communications of the ACM, 46(9).

Murr, J.S. (2002, November). CEO of the Virgin mega store. Executive.

Schofield, J. S. (1999). Beating software piracy proves to be no soft touch: James Schofield reports from Lebanon on the difficulties of protecting intellectual property. Academic Press.

Sikimic, S. S. (2010). The Lebanese national an- them: Plagiarized Gino blog. The Daily Star News.

Software and Information Industry Association. (2009). Software piracy is copyright infringement. In Opposing viewpoints: Copyright infringement. Academic Press.

TechRepublic. (2005). Stop internet piracy! Net- work admins should help. Internet Piracy.

UNESCO. (n.d.). Retrieved from http://www. unesco.org

Zuhur, S. S. (2001). Colors of enchantment: The- ater, dance, music and the visual arts of the Middle East. Cairo: American University of Cairo Press.

KEY TERMS AND DEFINITIONS

Human Capital: The human resource into business production in one of two forms manual or mental.

Infringement: The illegal use of registered property to others without the specific approval of the owner.

Intellectual Property: The business asset that produces most of the value added in business production in both its explicit and implicit forms.

Patent: Legal registration over a specified period of time of an innovative product or process that has potential industrial applications.

Trademark: Legal registration over a speci- fied period of time of a business name, logo, or any graphic representation.

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APPENDIX

Learning Objectives

L.O.1: Define copyrights. L.O.2: List the works that copyright protects. L.O.3: Differentiate between copyright, patent, and trademark. L.O.4: List the classes of intellectual properties. L.O.5: Explain why intellectuals copyright their work. L.O.6: Describe the effects of piracy on various people from an ethical perspective. L.O.7: List solutions to combat piracy.

Summary

Define Copyright

Copyright is a form of guard beached in the U.S. Constitution and arranged by law for unique works of composition fixed in a palpable medium of expression. Copyright covers published as well as unpub- lished works.

List the Works That Copyright Protects

Copyright protects unique works of authorship including literary, dramatic, musical, and artistic works, such as poetry, novels, movies, songs, computer software, and architecture. Copyright does not cover facts, ideas, systems, or methods of operation, even though it can shield the way these things are com- municated.

Differentiate between Copyright, Patent, and Trademark

The difference between copyright, patent and trademark is that copyright protects original works of au- thorship, while a patent protects inventions or discoveries. The way these are expressed may be covered by copyright. A trademark protects words, phrases, symbols, or designs differentiating one business from another.

List the Classes of Intellectual Properties

Intellectual property is classified into three different categories:

1. Creative Works: Include music, movies, books, and software and are therefore protected by copyrights;

2. Inventions: Protected by patents; 3. Brand-Name Products: Protected by trademarks.

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Explain Why Intellectuals Copyright Their Work

Originators of books, songs, or movies spend a lot of time, effort and money to come up with this cre- ative work. In order to give value for their production, they issue a copyright. This copyright entitles them to benefit from the profits (royalties) alone and at the same time prohibits others from illegal work reproduction without permission.

Describe the Effects of Piracy on Various People from an Ethical Perspective

From an ethical perspective, the impact of piracy affects a number of stakeholders such as the consum- ers, the artists and the government.

• Consumers benefit from low prices and suffer when they find out that they have purchased a poor quality product from online websites or when they do not receive the products they paid for.

• Artists or producers suffer from this act as they are deprived from collecting their royalties. This negatively affects companies because due to losses in revenues.

• Governments are incapable of collecting taxes from the revenues.

List Solutions to Combat Piracy

There are a number of solutions available to combat piracy.

• Activities by student organizations (e.g.Bicharaf.org book exchange fair at universities). • University initiated programs (e.g. World Intellectual Property Day at AUB celebrates which is

an awareness day). • Control the messages sent across ISPs. This would involve filtering processes into firewalls so as

to track the actions of individuals or users who exchange information online. • Fees paid to the originators must be reduced in order to encourage consumers to obtain legitimate

copies. • Training courses about copyright law enforcement (e.g. UNESCO’s Anti-Piracy training for

Trainers (APTT)). • Lebanese Government can employ is the report reward program.

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Chapter 19

DOI: 10.4018/978-1-4666-7254-3.ch019

Ethical Yielding

ABSTRACT

Customer Profitability Analysis (CPA) is a procedure that provides management with information re- lated to customers that will allow them to manage revenue from a profit perspective. The data attained from CPA will assist with decisions regarding marketing, product development, and capacity manage- ment to create a customer mix, which will provide the best profit results. BAR means the best available rate, in which a regular customer is charged in case he has approved to reserve. The various stages of yield management include: 1) grow a profit culture, 2) study the overall demand, 3) create price value relations, 4) form suitable market segments, 5) evaluate the pattern of demand, 6) find the failures and denials, and 7) assess and review the system.

INTRODUCTION

The purpose of every business is to generate prof- its. Perhaps the two most basic ways of increasing profit are maximizing revenue or minimizing cost (or both). Several strategies may be taken in order to achieve that end. Yield management is one of the strategies adopted to maximize profits. Yield management was first used in 1978 after the deregulation of the U.S airline industry. In fact, American Airlines was the first company to introduce a true Yield Management system that used historical and current booking patterns in order to adjust fare prices. This pricing strategy was given its name by Robert Crandall who was the former chairman and CEO of American Air- lines. The latter described it as “the single most important technical development in transportation

management since we entered deregulation”. Barry Berman (2005) describes Yield Manage- ment pricing as “a broad term that describes how a service provider can secure higher revenues from its relatively fixed capacity”. The general rule of thumb of Yield Management pricing is that the company must continuously endeavor to adjust and alter its prices based on reconciling reservations for future purchases in a specific time slot against the projected demand for that time slot (Berman, 2005). The application of yield management re- quires four main conditions which are:

1. Certain Demand Characteristics: Demand must be capable of being segmented, must be variable across time periods, and the differences of elasticity across the demand segments must be considerable.

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2. The Existence of Reservations: The service provided by the company can be reserved by the consumers at several time intervals before its consumption, and the demand for those services is fairly predictable.

3. Certain Cost Characteristics: The fixed costs must be high, and the costs of marginal sales must be low in comparison to marginal revenue.

4. Capacity Limit: The capacity is relatively fixed and perishable (i.e. the revenues from unused services are lost forever).

Yield management is the process of under- standing, forestalling and prompting customer conduct in order to make the most of yields from a fixed, delicate resource. There are 3 important settings for yield management to be pertinent:

1. Certain amount of resources accessible, 2. The resources sold are delicate, and 3. Diverse consumers will pay a different price

for the same amount of resources.

BACKGROUND

Tourism industry has always found ways to maxi- mize its profit while delivering not only a service but an experience to its clientele. Yield manage- ment is defined as the process of understanding, forestalling and prompting customer conduct in order to make the most of yields from a fixed, delicate resource (such as airline seats or hotel room reservations).

Yield management has become part of main- stream business theory and practice over the last fifteen to twenty years. Some consider it as an emerging discipline and others as a new manage- ment science. Today, Yield Management systems are being applied primarily in the service industry.

More specifically, in hotels, restaurants, airlines, cruise-lines, car-rentals, as well as entertainment companies (Okumus, 2004). The conditions men- tioned above apply to these industries, making Yield Management systems especially viable. In fact, Okumus (2004) states that “These service organizations therefore aim to ensure that their capacity is fully utilized and that revenue from it is maximized”. In concurrence with Berman’s claim regarding the prime conditions of Yield Management, Okumus explains that “an empty seat in an aero plane or an unoccupied room in a hotel represents an opportunity cost due to the perishable nature of the product. The marginal cost of selling another seat in an aero plane or a room in a hotel is far less than the marginal revenue. It therefore makes sense to sell more seats or rooms at discounted rates as long as the revenue is greater than the cost of the service”. Yield Management offers many advantages to the service company if applied correctly. Berman identifies three central advantages of the Yield Management pricing strategy which are:

1. Yield Management allows companies to better compete against low-costs providers.

2. Yield Management pricing is a good tool in allocating a service provider’s fixed capacity.

3. Yield Management is a more effective al- ternative to creating discounts.

Moreover, a study conducted in 2006 by Canina and Enz on U.S hotels revealed that there is a significant association between Yield Manage- ment and better than average profitability which is reason to believe that hotels that use Yield Management systems are better off financially than those who do not.

However, Yield Management does possess some pitfalls and can sometimes be difficult to cor- rectly implement. In 2004, Okumus investigated

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the usage of centralized yield management systems in the hotel industry. He collected data from over 160 hotels and his results uncovered that the main challenges to the proper employment of a Yield Management system lie in the following areas:

1. The organizational structure and culture. 2. High labor turnover. 3. Poor Human Resource Management

practices. 4. Ongoing developments and changes across

the company.

In addition to the difficulties cited by Oku- mus, Aurelio Mauri addressed the perception of fairness among consumer with regards to Yield Management in a paper published in 2007. Due to the nature of the system of Yield Management which continuously alters and adjusts the prices of the services, the practice is considered by many to be a form of price discrimination that has ethical implications. Maury states that “customers may perceive revenue management as an opportunis- tic behavior of the firm and then estimate these practices as unfair”. This estimation will most likely lead to adeterioration in customer trust and loyalty (Maury, 2007). The consequences of these perceptions range from Exit (the consumer leaves the current service provider for another), Voice (the consumer complaints to the current service provider), and loyalty (the consumer sticks to the current provider due to lack of other options) (Maury, 2007). Xia et al. identified four factors that lead to consumer perceptions of unfairness. The first factor is transaction similarity and choice of comparative other parties. The second factor is cost–profit distribution and attributions for the inequality. The third factor is the buyer-seller rela- tionship and trust. And the fourth and final factor in consumer perception of unfair pricing is social norms and meta-knowledge of the marketplace.

As previously mentioned, there exist several obstacles that hinder the effective application

of Yield Management systems. In 2005, Jean- Francois Sanchez and Ahmet Setir explored the implementation of Yield Management using dif- ferent reservation modes (online and offline) at a global hotel network over the span of two years. They assessed the effectiveness of both modes with regards to three performance measures which are the average price, occupancy rate, and average revenue per available room. The results of the study revealed that the online mode “outperforms the offline mode with respect to performance measures of average price and average revenue” (Sanchez & Setir, 2005). They further noted that hotels who switched from the offline mode to the online mode realized a substantial increase in their revenues.

YIELDING IN SPORTS ENTERTAINMENT

The first article talks about hotels in Ukraine that are applying a very high yielding to an extent that the customers are recognizing very well this high price. “Ukrainian hotels overcharging Euro 2012 England fans, says Uefa chief”, (Taylor, 2012). This was the title of an article published in the Guardian Magazine in March 2012. Ukraine oc- cupies eighth place in Europe by the number of tourists visiting, according to the World Tourism Organization rankings. In June 2012, the European football cup will take place in Ukraine and Poland. Therefore, these two countries will expect a high number of visitors for the whole month of June.

Ukrainian hotels are taking advantage and their hotel rates have been trebled in price from its usual rate during the tournament. For most of the three star hotels, a guest will be charged an average of 1,500 Euros for a three night stays. This is not happening in Poland. A fair high season price has been set in Poland.

The chief executive of Uefa’s (The Union of European Football Association) events arm, Da-

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vid Taylor, blamed the former Soviet republic of blowing a big opportunity to paint their country in a positive light. Mr. Taylor said that: “In the long run, tourist will think twice about coming to Ukraine, since they were or they knew that other tourist had been ripped off during their visit in June 2012”, Taylor, 2012.

Uefa is asking followers to observe the space section on the Euro 2012 page of their official website to evade being ripped off. David Taylor said “It’s is up to us to try to publicize these cheaper options but also to work with the governmental authorities to impress upon hoteliers this is a real chance to get people to come and visit Ukraine and get them to come back”, Taylor, 2012. Mr. Taylor summarized his speech by explaining that at the end of the day, Uefa doesn’t set hotel prices but we know that’s an issue for some fans.

RESTAURANT YIELDING

Another article talks about high profile customers that are getting less from what they are expecting even though they had selected the most expensive menu. “Customer complaints and complaint behaviors in Turkish hotel restaurants”, (Emir, 2011). They are claiming that restaurants in the hotels in Turkey are unlike restaurants outside the hotels in terms of perceived value. They charge high price without being delivering the value for the given price. Even after complaining about the unexpected food quality, nothing was done in return. The food was fine, but not as it had been expected to be. “Hotel or restaurant enterprise managers use feedbacks of the customers in order to determine and rectify the weakness in services or strengthen the strong aspects”.

YIELDING IN AIRLINE SECTOR

Going to the airline sector, the article “Yield management impact on airline spill estimation”

talks about how important to estimate properly the expected number of passengers that will be booked for each flight. This will enable the revenue management to yield to the maximum level while securing the maximum seats to be sold. Yield management will be based on the history and then with the number of tentative flight requested. As it is stated in the article: “we use of the detailed demand information provided by yield manage- ment systems, and we present recursively spill estimates in cases when multiple booking classes are used”, (Baobab, 2000).

Another article under the title “Airline yield management, an overview of seat inventory con- trol”, it talks about the survey that was done on current airline practice and how strategies have been set in order to determine what price should be set in order to maximize the revenue. The chal- lenge that the airline company is facing is that the inventory control is based on human judgment rather than systematic analysis.

“A survey of current airline practice indicates that seat inventory control is dependent on human judgment rather than systematic analysis; past work on the development of mathematical methods in this area has focused on large scale optimization models and simplified representations of the prob- lem”, Belobaba, (2000).Once places are limited or the date is so close, the revenue manager will interfere using his/her own knowledge based on his history and proceed the yielding strategy. For the article that was published on Asia travel tips “Cornell study reveals revenue management is key for hotels that price above the competition”, the study was found that hotels that price above their competitors are better revenue managers than those that offer rates below the competition. “We found hotels that price above their local competi- tors to be the most aggressive revenue managers, and economy hotels to be the least likely to adjust rates to fluctuations in demand”, Enz, 2003.

These hotels knows when they higher their rates and get the most profit out of each booking. As per the article in “Yield Management”, they

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consider that it has been effectively accepted by the airline industry ensuing deregulation in the late 1970’s. In a hotel context, yield management is related to market sensitive pricing of fixed room capacity relative to explicit market features. (Donaghy, 1999)

Seats are perishable in the airline industry, so once the plane leaves the land the remaining unsold seats will become a loss for the company. There- fore, they are very perishable. Yielding is done to maximize the profit, and last minute booking will be definitely having high price than making the booking ahead of time. Airline companies make special deals and promotion on the dates that are considered low season, and they estimate a low demand for the mentioned date. This may attract the customer to shift his flight in case he/she is flexible for the date that he/she can get benefit from this special price. In this way, the airline company is securing more sold tickets in order to maximize the revenue.

YIELDING IN HOTEL INDUSTRY

With the application of yield management in airlines and the great achievements yield man- agement application in the late 1970s, yield management has gained widespread acceptance in the hotel industries as an excellent method of management. Similar to the airline seat, the room is perishable too. Any unsold room will become a loss for the hotel in case it is not sold. In case there is a lot of demand, a yielding strategy to higher room categories will be applied in order to generate more revenue. Once there is a high demand, buyers will tend to pay more in order to get the accommodation. However, in case there is low demand an application of the packages and discount will be offered to the customer in order to convince him/her to select the specific hotel to book the room. The hoteliers really know that if they reach the evening without selling this room,

it will be definitely become a loss since they have lost the opportunity to get extra dollar revenue by selling the room.

Among the elements of yield management, price is the most important and flexible one. Whether the pricing-decision is right or not is related to the performance of the yield manage- ment directly.

The article “A study of pricing decisions in yield management of hotels” focuses on the pric- ing of yield management and attempts to build a pricing decision model of hotel yield management based on defining the concept of yield management in hotels. Another article “Yield management in Las Vegas casino hotels” freezes a bit the idea of applying the yield management since they want to attract the customers to play in the casinos, and most importantly the room rate should not be a challenge for them in order to think twice before choosing the hotel.“The rooms division in many Las Vegas casino properties has functioned almost as a loss leader to encourage guests to stay and play in the casinos. Applying yield management to boost rooms revenues does not seem to apply to such a scenario, but at least five Las Vegas prop- erties now have basic yield management systems that have boosted revenues” (Norman, 1997)

Customers that are going to Las Vegas are interested in playing the games in the casino, that is why yielding becomes very challenging since the customers will go definitely with the lower hotel price. Hoteliers set attractive hotel packages bearing in mind that the most of their revenues will be generated out of the games only.

BAR means the best available rate, in which a regular customer is charged in case he has ap- proved to reserve. The article “non performance penalty in the hotel industry” provides information about the problems with hotel reservations, can- cellations, no shows, holdovers, early departures, overbooking,, upgrades, walks, and the associated non-performance penalties or compensation. All what have been mentioned above are internal tools

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used by the hotel in order to secure the bookings and make sure that each penny is saved to the company. Other method of yielding is offering the customer a special price on a non refundable booking, therefore when the customer confirms the booking, he/she will never be able to cancel the booking even though he/she has an urgent mat- ter. Here, the hotel is making sure that the money paid is materialized and it is already in the pocket.

YIELD MANAGEMENT

“Yield management has to become an integral part of the daily work routine. A successful yield- management system depends on people as much as on sophisticated technology. Employees at all levels within the hotel property have something to offer”. (Jones, 1992). Therefore, yield man- agement must become a part of the employee regular work. The quality of information, analysis, forecasting, and performance is greatly improved when as many people as possible are involved in the process. Customer profitability analysis (CPA) is a procedure which provides management with information related to customers that will allow them to manage revenue from a profit perspective. The data attained from CPA will assist with deci- sions regarding marketing, product development and capacity management to create a customer mix which will provide the best profit results.

FUTURE TRENDS

In response to the perceived unfairness of yield management, Maury (2007) proposes a several solutions that hotels could adopt in order to limit the consequences of negative consumer percep- tions. The main solutions proposed are:

1. Setting up appropriate service recovery strategies that are to be activated in case of

overbooking. Overbooking is “practice of intentionally selling more reservations for a date than the actual room availability of the hotel” (Maury, 2007). Hotels usually engage in overbooking due to demand forecasts that they possess.

2. Hotels and other service companies who engage in Yield Management must be completely transparent with their customers regarding the price differences between dif- ferent consumers enjoying the same service, as well with the rates that the customer paid in the past.

3. The institution of rate fences, which if cor- rectly designed, will segment customers in a manner that justifies the price differences. There are two types of rate fences: physical (location, view from the room, size of the room etc…) and non-physical (time and duration of use, frequency and volume of consumption etc…).

REFERENCES

Anonymous. (2005). Cornell study reveals revenue management is key for hotels that price above the competition. Asia Travel Tips.

Belobaba, P. S. (2000). Airline yield management, an overview of seat inventory control. Journal on Computing, 21(2), 63–73.

Berman, B. S. (2005). Applying yield manage- ment pricing to your service business. Busi- ness Horizons, 48(2), 169–179. doi:10.1016/j. bushor.2004.10.015

Canina, L. S., & Enz, C. A. (2006). Revenue management in US hotels: 2001-2005. Cornell Hospitality Report, 6(8), 4–16.

Dekay, F. S. (2004). Non-performance penalties in the hotel industry. International Journal of Hospitality Management, 23(3), 273–275.

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Donaghy, K. S. (1999). Yield management. In- ternational Journal of Hospitality Management, 17(2), 139.

Emir, O. S. (2011). Customer complaints and complaint behaviors in Turkish hotel restaurants. African Journal of Business Management, 12(3), 64.

Ivanov, S. S. (2006). Management of overbookings in the hotel industry. Tourism Today, 6(5), 19–22.

Jones, P. S. (1992). Yield management puffing people in the big picture. Cornell Hospitality Quarterly, 33(1), 89–95.

Locker, T. S. (2005). The perceived importance of price as one hotel selection dimension. Inter- national Journal of Hospitality Management, 26(4), 529–529.

Mattila, A. S. (2009). The effect of price presenta- tion strategies on customers willingness to book. International Journal of Hospitality Management, 28(3), 279.

Mauri, A. G. (2007). Yield management and perceptions of fairness in the hotel business. In- ternational Review of Economics, 54(2), 284–293. doi:10.1007/s12232-007-0015-4

Meidan, A. S. (1995). Hotel reservation methods a discriminant analysis of practices in English hotels. International Journal of Hospitality Management, 14(2), 195–200.

Noone, B. S. (2009). Hotel revenue management and the internet. International Journal of Hospi- tality Management, 28(2), 272.

Norman, E. S. (1997). Yield management in Las Vegas casino hotels. Cornell Hospitality Quar- terly, 38(5), 28–31.

Okumus, F. S. (2004). Implementation of yield management practices in service organiza- tions: Empirical findings from a major hotel group. Service Industries Journal, 24(6), 65–89. doi:10.1080/0264206042000299185

Riffin, N. S. (1998). Development of an activity- based customer profitability system for yield management. Progress in Tourism and Hospital- ity, 4(3), 279.

Sanchez, J. F., & Satir, A. S. (2005). Hotel yield management using different reservation modes. International Journal of Contemporary Hospital- ity Management, 17(2), 136–146.

Schamel, G. S. (2012). Weekend vs. midweek stays modeling hotel room rates in a small market. International Journal of Hospitality Management, 23(3), 175–178.

Taylor, R. S. (2012). Ukrainian hotels overcharging Euro 2012 England fans, says Uefa chief. Guard- ian Magazine, 6, 19.

Xia, L. S., Monroe, K. B., & Cox, J. L. (2004). The price is unfair! A conceptual framework of price fairness perceptions. Journal of Marketing, 68(4), 1–15. doi:10.1509/jmkg.68.4.1.42733

KEY TERMS AND DEFINITIONS

Hospitality: Field of business practice provid- ing services of accommodation and restoration usually in tourism.

Profitability: Intended result of a hopeful business where revenues exceed expenses.

Seasonality: Periodic variations of a business performance expected usually due to previously forecasted conditions.

Segmentation: Separation of a market into individual components usually based on specific customer characteristics.

Yielding: Differentiated pricing tactic prac- ticed in occasional micro-monopoly circumstances aiming at extracting consumer service and trans- lating it into business profit.

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APPENDIX

Learning Objectives

L.O.1: Define yield management. L.O.2: List the essential conditions for yield management to be applicable. L.O.3: List the various stages of yield management. L.O.4: Define customer profitability analysis. L.O.5: Define BAR.

Summary

Define Yield Management

Yield management is the process of understanding, forestalling and prompting customer conduct in order to make the most of yields from a fixed, delicate resource.

List the Essential Conditions for Yield Management to Be Applicable

There are 3 important settings for yield management to be pertinent:

1. Certain amount of resources accessible, 2. The resources sold are delicate, and 3. Diverse consumers will pay a different price for the same amount of resources.

List the Various Stages of Yield Management

1. Grow a profit culture; 2. Study the overall demand; 3. Create price value relations; 4. Form suitable market segments; 5. Evaluate the pattern of demand; 6. Find the failures and denials; and 7. Assess and review the system.

Define Customer Profitability Analysis

Customer profitability analysis (CPA) is a procedure which provides management with information related to customers that will allow them to manage revenue from a profit perspective. The data attained from CPA will assist with decisions regarding marketing, product development and capacity management to create a customer mix which will provide the best profit results.

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Define BAR

BAR means the best available rate, in which a regular customer is charged in case he has approved to reserve.

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238

Chapter 20

DOI: 10.4018/978-1-4666-7254-3.ch020

Financial Fraud: Embezzlement, Ponzi Schemes,

and Credit Fraud

ABSTRACT

Fraud is a deception deliberately practiced in order to secure unfair or unlawful gain. Financial crimes affect private individuals, companies, organizations, and even states, and have a negative impact on the entire economic and social system through the considerable loss of money. It is very difficult to estimate the amount of money of fraud around the world since most of the transactions will never be actually reported. Announcing any fraud incident could affect negatively the company that is reporting, since any publicity would make customers lose their confidence in the company and therefore the price of the share would drop significantly. Therefore, companies would not be willing to reveal any assumptions of fraud and would try to keep the whole story away from the media and stakeholders to minimize negative outcomes. This chapter explores financial fraud.

INTRODUCTION

There are many types of fraud that are affecting our day-to-day activities in the financial sector: Insurance Fraud, tax avoidance, offshore invest- ment scams, pyramid schemes, payment card fraud. APonzi scheme is an illegal type of pyramid scheme in which money from new investors is used to pay “returns” to previous investors. It creates the illusion that the investment is actually paying off for investors. The scheme would keep going

as long as new investors are investing capital; however, this process keeps going on until no more money from new investors is raised and current investors will not get a return. Afterward, the whole scheme would collapse and people behind such financial pyramids would have to face legal challenges. Financial fraud is considered to be one of the controversial topics discussed often in the media. Governments and associations from all around the world are taking serious actions toward minimizing the amount of fraud in companies, and

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to prevent any schemes that would mislead any stakeholder dealing directly with any company i.e. shareholders, consumers, suppliers etc…

BACKGROUND

Fraud is defined in the American Heritage Diction- ary, as “a deception deliberately practiced in order to secure unfair or unlawful gain”. According to the INTERPOL website, “Financial crimes affect private individuals, companies, organizations, and even states, and have a negative impact on the entire economic and social system through the considerable loss of money.” There are many types of fraud that are affecting our day-to-day activities in the financial sector:

1. Insurance fraud; 2. Tax avoidance; 3. Offshore investment scams; 4. Pyramid schemes; and 5. Payment card fraud.

For a person to be involved in financial fraud, the person should be misrepresenting some mate- rial facts that could be misleading to others and could lead to actual damage to the second party. Here we can notice that having the intention to mislead third party individuals is very important, since the intention would facilitate the investiga- tion stage. (Adib 2002, Simmons 1995a)

Types of Financial Fraud

Financial statement balance fraud is considered to be one of the types of financial fraud. In this situation, the accountants and auditors would be issuing misleading information in their yearly financial statements that will reflect false assump- tions regarding the company. It is very important to notice, that people involved in financial fraud

must have the intention to manipulate the market and mislead decision makers, such as creditors, shareholders, and potential shareholders of the company. (Davia et al. 2000: Adib 2002).

Another example of financial fraud, is order- ing huge amounts of supplies and materials from wholesalers or manufacturers, and then vanishing with the goods and not paying the bills. (Chmidts 1997) There are many types of financial fraud that we will be discussing throughout our project, our concentration will be financial fraud related to Pyramid schemes. “A Ponzi scheme is an illegal type of pyramid scheme in which money from new investors is used to pay “returns” to previous investors. It creates the illusion that the investment is actually paying off for investors.” Here we can say that the scheme would keep going as long as new investors and investing capital; however, this process keeps going on until no more money from new investors is raised and current investors will not in get a return. Afterward, the whole scheme would collapse and people behind such financial pyramids would have to face legal challenges. An example on Ponzi scheme is Bernard Madoff, that was considered to be “the largest investment fraud in Wall Street history”. We will be discuss- ing the Madoff case in depth later on during the project, and the mechanism of the Ponzi scheme that Madoff followed.

Impact of Financial Fraud on the Country and Company

It is very difficult to estimate the amount of money of fraud around the world since most of the trans- actions will not be actually reported. According to Mclemore (1998), it has been estimated that fraud around the world is around 400 billion dol- lars. It is very important to note that announcing any fraud incident could affect negatively the company that is reporting, since any publicity would make customers lose their confidence in

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the company and therefore the price of the share would drop significantly. Therefore, companies would not be willing to reveal any assumptions of fraud, and would try to keep the whole story away from the media and stakeholders, to reduce the negative outcomes.

One of the issues that is actually considered controversial is the amount of involvement in any kind of financial fraud. “Nothing can do more damage to a finance manager’s career than to be involved in or nearby a fraudulent situation.” In other words, although someone might not be directly involved in fraud, people could still accuse the person to be somehow involved. (10 Telltale Signs of Fraud.)According to an article published by Ivy McLemore, she discusses the signs that could indicate whether employees could be related to any financial fraud in an organiza- tion. According to the article, the first indicator to whether your employees are involved in any kind of financial fraud, if some staff members don’t take holidays or vacation time since they don’t want to be detected (Mclemore, 1998).

FINANCIAL FRAUD AROUND THE WORLD

Financial fraud could have happen in any country around the world and in any organization. Many examples have taken place throughout the past decade; one of which is The Swiss Financial Institution, for which they have promised an im- practical high return for their investors, however they have actually returned investors with the incoming capital of new investors. After all, the institution reached a point where it became hard to raise new capital from potential investors; hence, many investors couldn’t earn the promised high returns the institution has offered at the beginning.

We can also take another example regarding financial fraud in the United States, the Enron Case. “With former Enron heads Ken Lay and Jeffrey

Skilling now found guilty of fraud, conspiracy and other charges, the scandal that brought down the former US energy giant in 2001 is back in the headlines.” . In other words, The Enron case was considered to have had a negative effect on the reputation of the corporate America. After which, the United States Congress passed the Sarbanes- Oxley law, that had very strict and firm rules that auditors have to abide with, and make the upper management more liable for every aspect states on their accounts. (Sarbanes-Oxley Law, 2009). It could be said that Enron had managed to keep their shareholders in the dark for many years, and mislead them by Enron’s nontransparent finan- cial statements. Therefore, Enron was engaged in fraudulent financial reporting to be able to provide shareholders with figures that they actu- ally expect. Accounting tricks that mislead third parties investors were the main reason of Enron’s collapse, since when the public new about all the accounting tricks, the price share collapsed (Canto 2002).

Financial Fraud and Its Impact on Lebanon

The business environment in Lebanon is subject to many fraudulent behaviors by its members because business is not well regulated. As Dr. Nasser Saidi, highlights in his article, Lebanon needs more regulations and corporate governance in commerce and should act upon the matter im- mediately as many companies have already been victims of financial fraud. Adnan Addoum, a state prosecutor, discusses the issue of scams that have occurred in Lebanon. R. T. was accused of embez- zling USD 200 million from Bank AL Mashrek. Also, S. E., a Lebanese businessman linked to Hezbollah was also charged of embezzlement and had stolen from investors millions of dollars. Lebanese firms fail to advocate corporate gover- nance. As a result many ceased the opportunity to commit financial fraud in Lebanon and stole

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huge amount of money from investors in schemes that could put the firm in a complete default risk.

There are some ethical theories that are di- rectly related to our topic and some others that are irrelevant to our scope of work. Unitarianism for example, means the right and the good for everyone, which is not the case in our situation, utilitarianism focuses on the outcome of our ac- tions rather than the virtue of the actions them- selves. It could be said that financial fraud that is taking place in Lebanon is not justifying anyone’s actions or outcomes; it is basically affecting the whole society in a negative manner.

Bank Secrecy and the Lebanese Banking System

Financial fraud is a breach of business ethics. No one can divulge a trade secret or any confidential business information for his own benefit or that of a third party. For this reason, the Swiss Criminal Code Banking Act has defined Bank secrecy in 1934 to protect customers’ financial information and Lebanon is part of the countries that follow this principle. The Lebanese banking system is known for being a chief financial center for the Middle East as well as on the international level. As a matter of fact, it allows free exchange and movement of capital and earnings, full conversion of the Lebanese currency to foreign exchanges and unlimited restrictions for internal and external flow of money. But the main characteristic of the Leba- nese banking system concerning embezzlement resides in the banking secrecy law to overcome money laundering.

of money. But the main characteristic of the Leba- nese banking system concerning embezzlement resides in the banking secrecy law to overcome money laundering

According to the BDL, the banking secrecy law was passed in 1956 and recognized all of the Lebanese banks in addition to their foreign branches to what has been named as the “secret of the profession”. Any bank’s manager or em- ployee bore to the institution’s activity, should not disclose any client’s information unless he is granted written permission by the client or in cases of bankruptcy or litigation. In this context, any breach is mostly used as a mean for illegal practices like money laundering. The best way to combat it is through the banking secrecy law. In point of fact, the BDL has obliged the Associa- tion of Banks in Lebanon (ABL) to sign a Due Diligence Convention to prevent such behavior. Moreover, it was also responsible for creating a special investigation commission (SIC) to fight money laundering and this is enabled through Law 318 in the Lebanese criminal code. According to Article 2, the cases mentioned in our examined article are acts of money laundering because they consist of acquiring, holding, using and invest- ing in illicit funds whilst knowing the unlawful nature of these finances. The SIC’s establishment has been fruitful to the Lebanese banking system through the reviewing of suspected accounts by special auditors to control the implementation of the Bank’s obligations in the terms of hiding evidence that raise presumption of money launder- ing. In her article “Banking secrecy and fighting money laundering around the Mediterranean sea: the case of Lebanon”, Hilda Bairamian (2006) also shows that the enlist of BASEL committee recommendations in the Lebanese Law pushed financial crime examination further in terms of money laundering. The reason is that such rec- ommendations frame managerial principles that institutions will implement thoroughly.

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FRAUD: UNDER THE HAMMER

Many recent financial scandals are mentioned but the N. A. case is the main focus because of its grave implications on the Lebanese economy. Rightly, there are numerous Lebanese financiers who held top positions of trust and eventually abused of them by wasting the funds of stakeholders and depositors. “ R. T. accused of embezzling up to USD 200 million from Bank Al Mashrek, M. T. of the Lebanese Arab Bank, N. C. of Euromed and Al Izdihar banks, etc…” whose cases are still pending in the judicial court.

N. A. has violated the banking secrecy law and unconstructively affected the Lebanese financial sector: N. A. head of the brokerage Association is believed to have received sensitive documents and information.” Such practice was also strengthened by other exploits like blackmailing his coworkers as well as almost everybody working in the sector over the last decade. Justly, bankers individually benefited from the drawbacks of the system and gained monetary leads by working with him.

This is also the case of Bernard Madoff who was the former chairman of the NASDAQ and he will be our concrete example aside with the N. A. case since he has carried out “the largest investment fraud in Wall Street history” per se the English news, Welt online. As prosecutor Addoum explains in the article, the breach of banking se- crecy is considered as a criminal act and is highly punishable. N. A. has exploited his position by making mechanized espionage despite the severe conditions formed by the banking secrecy laws. Indeed, he targeted the customer data of inves- tors from local brokerages and banks and used this stolen data to find these potential sponsors. Subsequent to that, he bad-mouthed the successful trading and sturdiness of the Lebanese economy, which encouraged these stockholders to transfer their accounts outside the country. This progres-

sion clearly shows how he contributed to capital exit of local deposits and devastated Lebanese repute as a credible investment hub. Though, he has vastly been active in money laundering.

Precisely, money laundering is defined by Article 1 of the European Union Directive as “the concealment or disguise of the true nature of funds, their true provenance, their place of residence, their transportation or transfers, their ownerships or the rights that are relative to them, while these funds are the result of grave crimes.” In “Money laundering”, Abdel Aziz Naser explains how money laundering functions. He represents the three major stages in a table and clarifies how these phases don’t always occur simultaneously or consecutively. They can occur over a short or large period of time, which makes it difficult to detect the scheme since the funds would have been subject to several levels of flow. When the customer hides information about the source of money, it is called a “concealment act” under sec- tion 4B of the Clayton Act, which is undoubtedly the situation at this juncture.

THE PONZI SCHEME

Ponzi schemes are one of the most intricate and profitable types of fraud. They produce soaring returns to initial investors from the funds given by the latter ones themselves deceived by entering a high return venture. The examined article is a live paradigm of utter Lebanese bubble scams based on the Ponzi scheme of simulated investing. The scheme’s name refers to Charles Ponzi, an Italian who moved to the United States in 1903. He is not the original creator of the theme; the expression was actually created in Charles Dickens’ novel Little Dorrit. Ponzi’s activities appropriated a great deal of money so that he was the initial person to be known in the country for his counterfeits. His

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veritable strategy dealt with the simultaneous buy- ing and selling of reply coupons for letter stamps and subsequently redirected investor’s capital as a mean to pay the premature ones while contributing to his individual prosperity.

Inquiring about the Ponzi scheme always leads to the understanding of the Madoff investment scandal. As a matter of fact, it was managed by the former chairman of the NASDAQ stock ex- change and dispensed around 65 billion dollars according to all the news that covered the case from the beginning of the hearing up till now. For this reason, the Madoff case will be our concrete illustration for financial fraud.

Thus, due to instantaneous vending, a Ponzi scheme is an arbitraging of commodities in diverse marketplaces and in many ways that provide the promoter in profit through the price different for a give asset. To be accurate, while any investment resides in making an actual profit, a Ponzi scheme consists of detaching an investor from his money and the money paid by the subsequent investors. New shareholders are encouraged to invest be- cause they receive unusual, high and inconsistent returns that other investments and even the most profitable are not able to meet.

To get the scheme going, investor’s money must be constantly flowing. The ploy collapses when the payments are superior to the earnings. Habitually, legal authorities interfere when sus- pecting a Ponzi scheme or when the advocate is advertising unlisted securities. It is with the rise of the number of investors that authorities start to suspect. The brilliance of the scheme resides in deceiving financiers, institutional investors and authorities on a long-term basis.

The Madoff Case

Despite being the spokesperson for the NASDAQ, Bernard Madoff managed to deceive investors and senior financial institutions. We will try to narrate his story reckon on reliable sources like

the NY times, the Financial software news and data company Bloomberg, the U.S securities and exchange commission (SEC), Financial times, Time Magazine, Financial Services Commission of Ontario etc… Earlier this year, Bernard Madoff was appealed for roughly a dozen felonies where he confessed operating his wealth management busi- ness in the form of a Ponzi scheme that swindled billions of dollars. His sentence was the utmost allowable, a 150-year imprisonment.

Bernard Madoff initiated his own firm in the Wall Street in 1960, Bernard L. Madoff Invest- ment Securities LLC. It was one of the topmost moneymakers on the Wall Street to the point that it went past professional firms in the field through the high execution of bidding over the counter (OTC) from brokers. It all began last year when his sons blew the whistle subsequent to his confession that the mastery behind the firm was a Ponzi scheme. Promptly, the man was arrested and charged with a series of securities deceit.

The New York Times defines Madoff as “smart in understanding very early on that the more involved you were with regulators, you could shape regulation. But, if we find out that the Ponzi scheme goes back that far, then he was doing something much smarter. If you’re very close with regulators, they’re not going be look- ing over your shoulders that much. Very smart.” This leads us to the exemplar behind the case that is the uncertainty of confidence and trust in the market but also in regulators and a rapid bawl for reform with the prolonged repercussions on the world’s financial services industry.

ANALYSIS OF FINANCIAL FRAUD IN LEBANON

The Lebanese financial market is subject to corrup- tion as many businessmen are engaging in illegal practices in order to maximize their profits at the expense of investors. In an interview conducted by

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the Executive, Adnan Addoum, state prosecutor, states that the reason behind this problematic issue is the lack of regulations that protect shareholders’ investments. As a result, more and more people are taking advantage of the system’s deficiencies and are able to rob others of their money. Differ- ent types of financial fraud exist; in Lebanon, the most frequent ones are embezzlement, breach of banking secrecy, fraudulent bankruptcy and wast- ing funds of shareholders. We will discuss some of the most popular cases that have occurred in Lebanon and will focus on a particular case, that of S. E., also known as the “Madoff of the Middle East”, who became famous for organizing one of the biggest Ponzi schemes ever witnessed.

R. T., a Lebanese-American businessman was convicted of embezzling USD 200 million from bank assets in Lebanon. The former became very well known among the Lebanese authorities as they have been tracking him for years, from country to country, trying to capture him for the crimes he has committed but failed at each attempt. R. T. first started gaining attention when he was appointed by the government to improve the performance of one of Lebanon’s most important banks, Intrabank, which also had shares in another bank, Bank Al Mashrek. In fact, R. T. was abusing his high-end position to funnel money into other countries without anyone taking notice. As a result of his wrongdoings, many banks filed for bankruptcy which in return slowed down the economy. When his schemes were finally discovered, he had al- ready fled the country and gone to the US. The Lebanese authorities requested extradition from the United States that came unanswered and the US authorities were obliged to release him after his arrest in Georgia due to governmental pres- sure. After this incident, T. escaped to Morocco and was once again arrested there however he was not detained for long and was soon free again. One of the reasons behind the failure of Lebanon’s extradition requests is because the country has no extradition treaties with other governments.

For this reason, R. T. was able to get away with it. Another important aspect that should be pointed out from this story is that Lebanon’s businesses and financial markets are not well regulated as opposed to other countries whom abide by the rules of Securities Exchange Commission (SEC) and the General Accepted Accounting Principles (GAAP). Hence, the country should issue laws and policies that protect investors and their as- sets otherwise our economy will continue to face downfalls.

Another case, that of N. A. a former broker, deals with financial fraud pertaining to breach of banking secrecy. N. A.’s crime consisted more specifically in stealing material information re- lated to investors from Lebanese brokerage firms and several local banks. Some of the banks that were involved in this scandal were Intra and Al Mashrek, which we have covered previously in the case of R. T. . In fact, Aoun was suspected of having collaborated with R. T. in these former two affairs, as he was his close associate. As a result, he used stolen information to blackmail and embar- rass people “at all levels of the industry” as stated by a broker in the Executive. The reason behind his success was that many bankers and financial traders profited by doing business with N A. even though they had no idea he was a fraud. This, in return, enabled him to stay longer in the business. His actions went beyond just violating banking secrecy; he used stolen information to persuade in- vestors to divert their investments abroad because he stated that Lebanon’s economy was not in good shape. This resulted in scaring off investors who thought that the Lebanese financial market was not worth putting their money in. Aoun not only committed a crime against investors and banks, he committed a crime against Lebanon. It is important to highlight the fact that “banking secrecy is the cornerstone of the sector”; his actions resulted in severe consequences for the country as a whole. In response to this issue, Adnan Addoum states that Lebanon’s Banks were not well regulated at the

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time in that they were both negligent and lacked sufficient supervision. For this reason, Nabil Aoun and many others like him were able to work their way through the system.

Up until now, we have covered two different cases; one, dealing with embezzlement and the other dealing with banking secrecy. Both of these affairs have had stern impact on the Lebanese economy resulting in the bankruptcy of banks and the reduction in investor confidence. Now, we turn our attention to another type of financial fraud: the Ponzi scheme. As it was mentioned earlier, a Ponzi scheme, as defined by the Merriam Webster Dictionary is “an investment swindle in which some early investors are paid off with money put up by later ones in order to encourage more and bigger risks”. Ponzi schemes are very attractive to investors because they promise high returns between 25-55%. The scheme was originally founded by Charles Ponzi but became popular later on with the case of Bernard Madoff. The latter is known to being the greatest Ponzi schemer in history. Madoff was charged of embezzling USD 173 billion and therefore was sentenced to 150 years in prison. Ponzi schemes have harsh consequences on the investors involved especially when they put in large amounts of money such as in the case of Madoff. A very similar case took place in Lebanon and made the headlines in every local newspaper. S. E., also labeled as “the Madoff of the Middle East”, became famous for pulling one of the biggest Ponzi schemes in the region. S. E. was able to woo investors from the South and the suburb of Beirut, also known as Dahiye. As highlighted in NOW Lebanon magazine, S. E. “took investments mainly from those in Lebanon’s Shia community, promising returns of 40 to 50%”. The reason is so because he had a close relationship with Hezbollah also admired him for and his pious character. Hence, a number of Hezbollah members had invested their money with him and this enticed many residents of the South to do the same because they trusted the party’s decision.

When investors are promised such high returns they should be suspicious because in most cases high returns are associated with Ponzi schemes. Many suffered from engaging in business with S. E. and a large number of people ended up with enormous debts and obligations to pay and had to sell all their assets including their homes. One taxi driver from the South of Lebanon stated that he had not lost anything because he received a payment of USD 8,000 when he had invested USD 10,000. This man obviously suffered a loss however he was not aware of it because he is uneducated and does not know how the system works. Consequently, we can say that S. E. robbed the disadvantaged who were affiliated with Hezbollah and benefited from their ignorance. This made the impoverished even more impoverished; in other words, more people are ending out on the streets. Hezbollah mem- bers were infuriated because they had lost large amounts of money as well however, “many party members are afraid to fully admit their losses to avoid questions about the origins of their wealth,” one of the bankers interviewed by NOW asserted. When S. E. finally became bankrupt because he was not able to pay back investors any longer, he decided to turn himself to the authorities. Another source claims he was kidnapped by Hezbollah and was later on surrendered to the authorities. After this incident, Hezbollah has denied any af- filiation with S. E. in a speech he had given. This statement seems distrustful because many at the time had acknowledged S. E. ’s close relationship with the party and many inhabitants of the South, whom we all know are heavy followers of the party, would not have invested with S. E. if the party had not done it first. NOW has published the following: “Residents in towns near Tyre and Dahiyeh, however, are not convinced. Numerous reports of people upset with S. E., whom they trusted because of his reputation as a pious man close to the party, have surfaced in the local and international press in recent days”. Hence, we can say is that there is room for reasonable doubt. S. E. is currently in custody and no charges have yet

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been released; investigations of the case are still being carried on. It is shocking that such a man who was admired for his honesty and piety could actually be accused of committing such a crime and harming so many people. S. E.’s acts had severe repercussions on the country’s economy however banks were not affected. His business was merely an affair between himself and private investors. Once again, Lebanon’s lack of regula- tions and laws to protect investors is one of the major reasons why financial fraud has become mainstream in the country.

FUTURE TRENDS

The last two decades, noticeable by financial unpredictability, economic catastrophes, the bank- ruptcy of international well-known corporations, stock exchange conjectures, financial disgraces and absence of trust in capital markets, have led to an economic collapse and have brought back the examination of the accountable reasons. Out of these, financial fraud is a substantial component viewed as a catastrophic occurrence hard to jot under nontoxic touchlines. Hence, the identifica- tion of the responsible aspects of fraud is today an essential desideratum at a worldwide level for the deterrence and abolition of these harmful actions past the psychosomatic methods (Mironiuc et al., 2012).The chief financial mechanisms of fraud are recognized in order to gain score organization functions, and to decide the likelihood of occur- rence of the risk of fraud beginning with a series of sanctified economical-financial indicators through the use of progressive statistical meth- ods of data analysis. Performance of six popular statistical learning models in detecting financial statement fraud of fraud firms can be compared to nonfraud firms. Surprisingly, logistic regres- sion and support vector machines perform well relative to an artificial neural network. Diversity in predictors may be used in the classification

algorithms. Out of 42 predictors examined, six are only consistently selected and used by different classification algorithms: auditor turnover, total discretionary accruals, big 4 auditor, accounts receivable, meeting or beating analyst forecasts, and unexpected employee productivity (Perols, 2011). These results spread the field of financial statement fraud research and may be used by practitioners and regulators to improve fraud risk models.

CONCLUSION: SOLUTIONS TO PREVENT FINANCIAL FRAUD

Progress has been made incessantly in the regu- lation of financial markets and banking systems. Special courts with powers to control any bank under suspicion enforce new laws that have been passed to prevent breaching of banking secrecy. Central Bank and the Banking Control Com- mission have been strictly applying these laws which have resulted in the complete elimination of fraud in this area. Moreover, more laws enable the effective investigation of cases such as money laundering and financial terrorism. As to finan- cial markets and the trading of securities, many countries still fall short in terms of regulations and needs to come up with strategies to increase the number of loyal and honest personnel and reduce the potential for financial fraud. Efforts have to start somewhere. It is a long road towards achieving full transparency.

REFERENCES

Alami, M.S. (2009, September 9). Lebanon’s biggest Ponzi scheme. NOW Lebanon.

Bairamian, H. S. (2006). Banking secrecy and fighting money laundering around the world. Academic Press.

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Banking Liaison Group. (2002). Business finance and baking advice: International financial fraud. Author.

B.S. Madoff’s Official Blog. (2009). The talented Mr. Madoff. Author.

Canto, V. A. (2002, January 14). How Enron failed: It’s a common thread in the arbitrage business. National Review Online Financial.

Davia, H. R. (2001). Fraud 101: Techniques and strategies for detection. New York: John Wiley & Sons, Inc.

Gandel, S. S. (2008). Wall Street’s latest downfall: Madoff charged with fraud. Academic Press.

International Consulting and Investigation. (2002). What is financial fraud? Mediterranean Sea: The case of Lebanon. Author.

McLemore, I. S. (1998). 10 telltale signs of fraud: Part one of a series. Retrieved from http://www. businessfinancemag.com

Mironiuc, M., Robu, I.-B., & Robu, M.-A. (2012). The fraud auditing: Empirical study concerning the identification of the financial dimensions of fraud. Journal of Accounting and Auditing, 2012, 1–13.

Perols, J. S. (2011, May). Financial statement fraud detection: An analysis of statistical and machine learning algorithms. Auditing, 30(2), 19–50. doi:10.2308/ajpt-50009

Saidi & Nasser. A. H. (2004). Corporate gover- nance in MENA countries: Improving transpar- ency and disclosure: The second Middle East and North Africa regional corporate governance forum, Beirut, June 3-5, 2004. Lebanese Trans- parency Association.

KEY TERMS AND DEFINITIONS

Audit: Examination and investigation of business practice for the purpose of tracking all transactions.

Money Laundering: Multi-stage money trans- fer transactions resulting in hiding the original source of the money.

Ponzi: Centrally operated pyramid-shaped shady micro-transfers of wealth in which small amounts of money from a very wide base are chan- neled into one large sum directed to one entity at the top of the pyramid.

Secrecy: The respect for individualized privacy of money information in financial transactions and in business and public information exchange.

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APPENDIX

Learning Objectives

L.O.1: Define fraud and describe the impact that financial crimes have on individuals and other parties. L.O.2: List the types of fraud in the financial sector. L.O.3: Define and describe a Ponzi scheme. L.O.4: Discuss the impact of financial fraud. L.O.5: Describe the Lebanese banking system. L.O.6: List suitable solutions for eliminating or lessening financial fraud.

Summary

Define Fraud and Describe the Impact That Financial Crimes Have on Individuals and Other Parties

Fraud is a deception deliberately practiced in order to secure unfair or unlawful gain. Financial crimes have an effect on individuals, companies, organizations, and even states, and have a negative effect on the entire economic and social system through the considerable loss of money.

List the Types of Fraud in the Financial Sector

There are many types of fraud that are affecting our day-to-day activities in the financial sector: Insur- ance Fraud, tax avoidance, offshore investment scams, pyramid schemes, payment card fraud.

Define and Describe a Ponzi Scheme

A Ponzi scheme is an illegal kind of pyramid fraud where money from the new investors tends to be used to pay “returns” to old investors. It builds the delusion that the investment is really paying off for investors. The scheme would keep going as long as new investors and investing capital; however, this process keeps going on until no more money from new investors is raised and current investors will not in get a return. Afterward, the whole scheme would collapse and people behind such financial pyramids would have to face legal challenges.

Discuss the Impact of Financial Fraud

It is very difficult to estimate the amount of money of fraud around the world since most of the transac- tions will not be actually reported. Announcing any fraud incident could affect negatively the company that is reporting, since any publicity would make customers lose their confidence in the company and therefore the price of the share would drop significantly. Therefore, companies would not be willing to reveal any assumptions of fraud, and would try to keep the whole story away from the media and stakeholders, to reduce the negative outcomes.

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Describe the Lebanese Banking System

The Lebanese banking system is known for being a chief financial center for the Middle East as well as on the international level. As a matter of fact, it allows free exchange and movement of capital and earnings, full conversion of the Lebanese currency to foreign exchanges and unlimited restrictions for internal and external flow of money. But the main characteristic of the Lebanese banking system con- cerning embezzlement resides in the banking secrecy law to overcome money laundering.

List Suitable Solutions for Eliminating or Lessening Financial Fraud

• Special court was installed with powers to control any bank under suspicion. • New laws have been passed to prevent breaching of banking secrecy. • The Central Bank and the Banking Control Commission have been strictly applying these laws

which have resulted in the complete elimination of fraud in this area. • The country has been implementing more laws that enable the effective investigation of cases such

as money laundering and financial terrorism.

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Chapter 21

DOI: 10.4018/978-1-4666-7254-3.ch021

Child Labor

ABSTRACT

Child labor is a social problem invading the world and especially the less developed countries where educational levels are low. Despite the laws that are enforced each year by international agencies to prevent child labor, reality does not reflect the efficacy of these laws. Two cases, one international and one local, reflect how abused children are being treated around the world and how their rights are be- ing invaded. Illiterate poor families as well as businesses contribute in taking advantage of child labor in serving their own profits, especially with the lack of strict regulations that abolish this issue. Child labor is an issue that cannot be neglected and a human right concern. It is affecting children negatively because they are being exploited and forced to work at a very early age, while other children are getting educated and having a proper childhood. This chapter explores child labor.

INTRODUCTION

Child labor is defined as the employment of children when they are below the legal age. The International Labor Organization (ILO) describes child labor as “some types of work” prepared by children under 15 years of age and states that it prevents them from getting educated and affects their health. Child labor is a social concern, pre- cisely in rural areas. Moreover, the educational status of working children is very low. There are many causes that provoke children to work such as poverty, poor access to education, low social awareness and inadequate enforcement of child labor laws. The different components that make up child labor and caused its rates to rise are:

poverty, government policy failure, high cost of education and living, parents who want more income, weak laws to protect these children and the wrong intention of factories. The reasons that stand behind child labor could be associated to poverty, the social situation, and the economic situation in developing countries. The family situation of the children and the schools are two of the main reasons for children labor. Moreover, the violence that the children are facing at both home and schools create unfavorable condition for the children to peruse their education.

Child labor has been observed all around the world, especially in poor and developing countries. The International Labor Organization states that about 215 million children whose ages range be-

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tween five years and seventeen years are forced to work. This phenomenon is recognized in regions such as India, Nepal, Cambodia, and sub-Saharan Africa, where people live in poverty and can’t afford getting educated. Moreover, child labor can also be observed in wealthy and developed countries but in a lower percentage compared to developing countries. Child exploitation is being done in very various and diverse fields. Children can be used for military purpose, polishing shoes, prostitution, cleaning factories, selling goods in the streets, slavery and many other informal jobs. This problem has become a big challenge worldwide.

BACKGROUND

Child labor hinders children’s development and leads to severe effects on their well-being. More- over, working children tend to have a very poor low-leveled education, and are more subject to crimes and drugs. Many nations and social acts started to address this issue aggressively. Many acts developed to fight child labor. Moreover, Several Unions along with families and community members and organizations are joining hands to stand against child labor. A lot of workforces in the United States as well as other countries are showing support of efforts to terminate child labor by pushing coalitions with unions in other countries that hold companies accountable for labor practices.

There should be more intervention by the mu- nicipalities of villages, since they are the closest form of authority to the villagers. In addition, Non Governmental Organizations should attempt to supply laborers of the legal age to replace the abused children. Furthermore, the Labor Union should conduct regular auditing visits to make sure the workforce has no underage workers, along with the UNICEF who should present to the parents the potential success of their children

if they are given the chance to excel like normal students. Finally, the government should encour- age farmers to switch to safer crops like fruits and vegetables through promoting the farmers goods, thus decreasing the amount of harmful exposure children endure.

CHILD LABOR

Many social phenomena shaped our world throughout centuries. Some of these issues van- ished and many are still present today. Child labor is one of the most important concepts present in many regions around the world. It refers to the employment of children when they are under the legal age. The International Labor Organization (ILO) defines child labor as “some types of work” done by children under 15 years of age and states that it prevents them from getting educated and affects their health.

Child labor is a social problem linked with the growth of manufacturing production and capitalism. It was first visible in early agricultural societies. However, in the course of the Interna- tional Revolution of the 18th century, it started being attacked. Later, it became one of the largest scandals of the 19th centuries, scattering to other countries as they industrialize. The problem ap- peared when young kids were hired by factories. They were obligated to work for long hours under hazardous conditions in return for very little pay.

It was practiced from historical times when throughout the industrial revolution, youngsters had jobs in factories in unfavorable conditions. Those who were engaged in child labor came from poor low-income families. Generally, child labor attacked underdeveloped countries and oc- curred at lower rates in more developed regions. This topic drove the attention of people around the world and it is considered a crucial threat to many societies.

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The Situation of Working Children

Child labor is mainly to the basic human rights and it hindered children’s development leading to severe effects on their well-being. Child labor not only affects children’s health but it also af- fects many other dimensions of their life. Working children will tend to have a low level of educa- tion. Thus the jobs they occupy in the future are modest jobs that pay little income and this affects their whole standard of living. Statistics show that children at labor and far from education are more subject to the threatening power of crimes and drugs.

Due to its harmful effect on children and families as a whole, many nations and social acts started to address this issue aggressively. An em- ployer isn’t usually permitted to employ individu- als under a certain age. The minimum age varies from country to country. Many laws prohibit the employment process below the minimum age. As the countries become more and more developed, more of those acts arose to fight child labor. Child labor rates started decreasing across the world and children were getting more educated.

Moreover, Unions are recognized the con- nections between worker rights and the danger of child labor. They are joining hands with many families and several community organizations to stand against and attack child labor. In today’s global environment, unions are important to protect against this violation. Many workers in the United States as well as other countries are showing support to terminate child labor by forc- ing alliances with unions in other countries. These alliances share a goal of achieving global labor standards, such as ILO Convention 182, and hold firms responsible for labor practices.

Child labor refers to the employment of un- derage children at regular and sustained work schedules. An example of child labor would be employing underage children, paying them the

minimum wage or even below as they work in unsuitable working conditions. Thus, they are deprived of education and a normal social life. When someone mentions child labor, this means the child is being deprived of the normal lifestyle children his/her age live, which includes proper education and socialization. It is worth noting that the word, “work” means full time commercial work to sustain one’s self or add to the family income, whereas a part-time job is occasionally voluntary and occurs during the summer vacation or after school as a means to gain extra pocket money and experience. According to United Nations Children’s Fund statistics, “An estimated 158 million children aged 5-14 are engaged in child labor which adds up to nearly one in six children in the world.” Broadly children who are employed in activities in order to feed themselves and their families are more likely to become subjects of “child labor”.

Generally different schools of thought believe that child labor would be absent in developed countries due to their high economic standards, sadly this is far from the truth. Moreover, people in rural families who are suffering from poverty perceive their children as a source of income to support the family. As a result, parents sacrifice their children’s education to meet the rising needs of their younger siblings. In addition, it is worth mentioning that statistics show that Lebanon has one of the highest proportions of working children (approximately 100,000) between the ages 10-17. The Ministry of Education is trying to provide as many children as possible with education since it is the lack of schooling, among many other factors, that forces a child to work. Furthermore, the International Labor Organization launched a campaign in 1999 which was entitled “Elimination of Child Labor”. Even though numerous extensive efforts have been made, we still see children work- ing on the streets or working at factories which only show that these efforts are just not enough.

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Humans have progressed drastically, yet failed to revolutionize social politics to fight for chil- dren’s rights. Finally some may argue that child labor is an utter requirement for the survival of millions of people in many of the poorest parts of the world for it is an unethical practice and should be controlled. So the question that we are faced with everyday is whether these children should not work and starve or should work and ruin their childhood.

Some governments are trying to take actions to stop this type of exploitation and to eliminate child labor. But in order to be able to do so, all societies must help and work to reach this objec- tive. It is a fact that child labor has been an issue for a long time and there is a logical reasoning to why this problem is historical and persistent. A child laborer will most probably grow up and have children who will also become child laborers by virtue of their family’s economic and educational condition. It has become a cycle that is very dif- ficult to break. It means that children who are born in households where the income generated is not sufficient to provide the basic needs for the family members will end up working. These children in return will not be educated, will have poor health and most importantly will not get a chance to have a better life than their parents. Child labor is not a recent issue and people have tried to solve it, or hide it, for quite some time; it has evolved from a regional matter to an international one. At some point, child labor was the reason for some policy interventions, especially those that are initiated by non-governmental organizations and the United Nations Children’s Fund. Despite the acknowledgement that child labor does, in fact, harm children and despite the efforts to reduce this problem, the effects of these efforts have been very miniscule. This is especially due to the fact that the greater part of child labor takes place in the unofficial sector, which is usually not properly covered by legislations.

Even though child labor is usually linked to poverty, it has persisted in several countries, especially in Latin America, whose living stan- dards have improved substantially (Gunnarsson, Orazem, Sánchez, 2006). Many countries have adopted several policies to combat child labor especially ones that have a legal working age and others that deal with education. Most of these policies have used legal prohibitions, but these legal prohibitions will only be effective if they are properly enforced, which is very difficult. It’s estimated that about 115 million children around the world are in the workforce (Presutti, 2010).

Child labor is not about a son or daughter as- sisting on a family business basis. It’s not about a child working after his/her school. It is about kids who are forced to work around the clock and therefore, they are deprived of the chance to get an education. The question; however, remains can work deny a child from education if there is no school in his or her area? Can a child get education if the family does not have enough income to feed the child, let alone send him to school? This shows that there are much more fundamental issues to be dealt with before assessing the effectiveness of laws and regulations against child labor. This is a problem that will not be solved overnight and up until today, there hasn’t been any effective solutions that help end this problem. Due to the wrongful nature of child labor, it is generally dif- ficult to find out more about child labor because it is intended to be hidden. Employers will not talk because they will hurt their business, parents will not confess because they are scared they will lose their children (or their income), and children will not talk simply out of fear of punishment.

Even though views on child labor also depend on cultural traditions, levels of economic devel- opment, and social conditions, a wide agreement exists on the rejection of the worst forms of child labor. Child labor is usually linked to poverty; it has persisted in several countries, especially

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in Latin America, whose living standards have improved substantially (Gunnarsson, Orazem, Sánchez, 2006). Many countries have adopted several policies to combat child labor especially ones that have a legal working age and others that deal with education. Most of these policies have used legal prohibitions, but these legal prohibitions will only be effective if they are properly enforced which is very difficult. It’s estimated that about 115 million children around the world are in the workforce (Presutti, 2010).

Assuming that part of a multinational com- pany’s corporate social responsibility is not to hire children, things become more complicated. If we think about child labor in the hiring company’s point of view, it becomes a harsh move toward the country they hold their activities in because it involves firing child workers or ending associa- tions with suppliers that hire them. As good as it may seem to people who oppose child labor, this does not change underlying causes and does not stop child labor. In such sensitive cases, codes must be precise, strictly executed and supervised, and combined with alternative provisions for working children. The international argument has quite a few repercussions for companies and their codes of conduct. In their international business activities, companies are faced with different insights about child labor, the position of children in society and the principles that should be adopted. Commonly, departing opinions can be noted between the host countries in which they operate and their country of origin, especially if the country of origin is a developing one. In their home countries, com- panies face a quite different set of expectations about their role in society, and possibly stakeholder pressure that moves away from what host govern- ments find acceptable. This can lead to serious problems, for example, with consumers at home forcing a complete prohibition on child labor, while the company operates in countries where the government lacks regulatory infrastructure. (Kolka, Tulderb, 2002)

Child labor is not about a son or daughter helping out on a family business. It’s not about a kid working after school. It is about children who are forced to work and denied the opportunity to get education. But can work deny a child from education if there is no school in his or her area? Can a child get education if the family does not have enough income to feed the child, let alone send him to school? This shows that there are much more fundamental issues need to be dealt with before assessing the effectiveness of laws and regulations against child labor. This is a problem that will not be solved over night and up until to- day, there hasn’t been any effective solutions that help end this problem. Due to the wrongful nature of child labor, it is generally difficult to find out more about child labor because it is intended to be hidden. Employers will not talk because they will hurt their business, parents would not confess because they are scared they would lose their children (or their income), and children would not talk simply out of fear.

There is a lot that the government, as well as the society, can do to help protect the rights of these underage workers since prevention is somewhat farfetched. It is not a matter of what the government can do; it’s a matter of willingness to change. As opposed to developing countries, impoverished families in developing countries do not have many alternatives to provide their children with better options. Laws and regulations will not be enforced without the presence of a solid sustainable means of support.

Many wonder where is the line that differ- entiates child labor from children engaging in part-time jobs. When we are considering child labor, we should consider three circumstances. The first is the characteristics of the actual job, in other words, what actions do the children commit in order for the job to be done. The job should be a self-developing work, where it aims at helping the child progress and giving him/her full freedom to make their choice including quitting anytime

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they want. As for the second circumstance, it lies in the danger the child is exposed to during the working hours. The child should not be working in hazardous conditions. According to the general definition of hazardous forms of child labor, “work is hazardous when it is likely to harm, by its nature or the circumstances by which it is carried out, the health, safety or morals of children” (Ensing, xxnd)). He/she should choose a job that suits him/ her and at the same time help them progress. Any job that has danger in it should not be permitted to children. According to the Government of India, “there have been 2 million children working in hazardous industries that have resulted in harmful consequences either affecting children mentally or harming their physical development.” Examples of hazardous occupations include brick manufac- turing, stone quarrying, fireworks manufacturing, lock making and glassware production. As a result children should not suffer in their jobs; rather, they should choose a job that is appropriate for their age and their health.

The most important thing a child requires is the opportunity to go to school and get an education. If the child is deprived of schooling then he should quit the work force and go to a school to get an education. Ergo, having a job should not deprive a child from getting the education he needs for education should come first followed by work. There is nothing wrong with a child trying to help his parents and provide income for his fam- ily but this should not substitute his education. After discussing these three circumstances we can differentiate between a part time job, when the child works voluntarily and child labor when the child works involuntarily. First, the part time job should take place during the child’s free time and on vacations, while the child is receiving proper schooling. In child labor the child does not attend school at all for his main goal in life is working as much as he can in order to provide his family with extra money. Another difference is the level of danger in the job. In part time jobs, the work is not harmful but rather it helps the child progress

and learn beneficial things. On the other hand, child labor mainly goes hand in hand in hazard- ous and harmful working conditions. As a result, the three conditions are what draw the line and differentiate between voluntary work and child labor. Another important component we need to consider in child labor is the age of children who are working. According to the International Labor Organization, the minimum age for work varies between 14 to 16 years in various countries. So companies and industries that employ children under the age of 14 are breaking the law and thus they are resulting in child labor. Companies should always hire children above the minimum age in order not to face problems later on.

Child Labor Practices in Vietnam

On October 1996, CBS News aired a program about the cruel behavior supervisors towards their workers, the payment of salaries under the legal minimum wage, and the sexual abuse of many female workers at an international shoe manufacturing plant in Vietnam. Employees were physically mugged during their work hours. Temporary employees were paid, approximately, 20 cents per hour while team leaders were paid $42 per month; regular workers earned even less. The CBS news program aired talks with team leaders and presented a copy of a labor contract to demonstrate its assertions. On March 1997, Reuters reported that 56 women were required to harshly run around one whole factory. Twelve of them experienced shock, fainted and were then taken to a hospital. Because of these reports, some Vietnamese Americans started contacting several labor groups and journalists in Vietnam. A group called Vietnam Labor Watch (VLW) was prepared to study the working conditions of employees at factories in Vietnam and monitor labor practices on an continuing basis. VLW visited the alleged factories in Vietnam and met with workers, shoe manufacturing executives, labor union representa- tives and legal experts.

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By the end of 1997, VLW issued a report that accused the multinational firm of violating several labor laws. According to the report issued, these firms didn’t pay the minimum wage, did not of- fer proper working conditions, and didn’t take satisfactory health and safety actions. Moreover, child labor and sexual harassment were not ac- knowledged, but instead ignored, in its factories. That same report also revealed that there was a difference between the actual practices in factories in Vietnam and what worldwide customers were told about labor practices. Analysts said that in spite of its good image globally, that was a very different company in Vietnam and other Asian countries. The poor conditions in Asian factories were confirmed by several leading newspapers and journals including The New York Times, USA Today, The Wall Street Journal, Associated Press, and Reuters.

The VLW Report and Recommendations

According to surveys and interviews carried out by VLW, workers in factories in Vietnam were exploited in many ways and the Code of Conduct was being violated consistently by its contractors. Though the multinational claimed that it was trying to monitor and enforce its Code, it did not have an effective system in place for monitoring and enforcement. There were not enough supervisors in all of their factories in Vietnam to ensure that its contractors were complying with the Code of Conduct on a day-to-day, shift-to-shift basis. And so the VLW recommended that the multinational takes the following steps in Vietnam:

1. Abandon the practice of using probationary wages or paying the workers below minimum wage under the guise of providing technical training.

2. Make the implementation of its Code of Conduct a top priority, putting it above even quality and cost.

3. Levy a stiff monetary penalty on the con- tracting company whenever it violates the Code of Conduct.

4. Immediately enforce the 60 hour work week specified in the Code.

5. Be a good corporate citizen in Vietnam. Creating low paying jobs is not good enough.

6. Work directly with the Vietnam General Confederation of Labor to hear the com- plaints from workers and to talk with workers outside the factory environment.

7. Consult with several Vietnamese who are experts in shoe factories and on how to establish better labor practices.

8. Immediately implement all of the recom- mendations made by Vietnam’s Health Department to improve the health and safety conditions in factories.

9. Implement all of the recommendations made by Ho Chi Minh City’s General Confederation of Labor, which include: classes on labor rights for workers, regu- lar medical examination for workers, and establishing a pay scale that is fair and that abides by Vietnamese labor law.

Corporate Reaction

The corporate chairman, who was heavily criti- cized for the practices in Vietnam, attempted to convince the critics that they had only ever employed children accidentally since it is very easy in some of the third world countries such as Vietnam to get a fake evidence of age, in addi- tion he denied the use of unfair labor practices, and later on the company sent representatives to college campuses in the US in an attempt to convince students that their treatment of foreign labor was fair. In addition, they posted a 12-minute online video tour of its contracted shoe facilities in Vietnam. They explained the rationale for this move, “Unlike US-based reporters, who are writing about factories they have never visited, journalists working in those countries understand

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the local conditions.”And in additional efforts to convince the public that they are indeed working to improve the work standards in remote plants in the far east and other countries, the following six commitments were promised:

1. All their foreign shoe factories will meet the U.S. Occupational Safety and Health Administration’s (OSHA) standards in in- door air quality.

2. The minimum age for factory workers will be raised to 18 for footwear factories and 16 for apparel factories.

3. They will include non-government organiza- tions in factory monitoring, with summaries of that monitoring released to the public.

4. They will expand worker education pro- grams, making free high school equivalency courses available to all workers in their footwear factories.

5. They will expand micro-enterprise loan programs to benefit four thousand families in Vietnam, Indonesia, Pakistan, and Thailand.

6. Funding university research and open forums on responsible business practices, including programs at four local universities.

In May 2001, a report prepared by a labor rights group claimed that even after three years, the multinational had not delivered on all its promises. The report said that they used to warn its factory managers about inspections by its own inspectors in advance, allowing them to minimize toxic fumes by the time they arrived.

International Cases

Child labor has been around for a very long time in nearly all industries; however, one industry in specific is the host to one of the biggest popula- tion of working children. The agriculture industry is well-known for its infamous influence on the children who are forced to work in the fields, particularly cotton, and tobacco. Burkina Faso is

the capital of one of the poorest countries in West Africa and sometimes in the world. Organic and fair-trade cotton is produced there. In this country, child labor is widespread. Farmers there claim that they cannot have their work done without forcing children to work. One child working in picking cotton is a 13 year-old girl. She doesn’t go to school, she is underfed and she gets beaten whenever she doesn’t finish her work or slows down while working. Her workday starts before sunrise and ends after sundown. Every day, she wakes up on the voice of a man shouting to get up to work and she is always worried about the things she is going to suffer that day. The plot in which she works is as big as four American football fields. And all she has are her bare hands and a hoe. This work is not supposed to be performed by a child. But extreme poverty in that country makes child labor a routine. And the childhood of all those children has been lost. People in this country live on less than $2 per day. Sometimes, the children eat nothing all day.

The harvested cotton goes to factory in India and Sri Lanka, where it is used for producing fancy underwear for an American retailer for women lingerie and beauty products, which records more than $5 billion in sales annually. The pair of zebra underwear sells for $8.5 while people in poor countries live on almost $2 per day. In December 2011, some of the lingerie cotton was claimed to originate from Burkina Faso. However the retailer claimed that very minimal amount of cotton comes from this country and they do not purchase from suppliers who exploit children. Cotton picking is just one of the many wide jobs that can take advantage of poor children for generating profits and reducing their labor costs.

Behind child labor, there are big companies that claim to support human rights and fight against human abuse in their country; however, they don’t actually mind taking advantage of children in poor countries. Although those companies, such as the cotton lingerie business, try to defend child labor in public, in practice, all their products come

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actually from the exploitation of children. Daniel is a six-year old boy, in Brazil, who works in the tobacco fields and ties bunches of tobacco. His normal day consists of sitting in a storage room filled with tobacco leaves and working with his younger sisters. His father takes pride by his son’s dexterous ability of hastily tying bunches of leaves every day. The business has taken a toll on the father since one day the poison he uses blew on his feet and caused a permanent rash. In addition, the long exposure to nicotine has also caused the children to become anemic causing them to vomit and have stomachaches occasionally. Daniel and his sisters are deprived of any activity within the realm of childhood, whether it is entertaining or educational. When asked about the issue, the children’s grandmother simply says “If everyone goes and studies, there will be no one left in ag- riculture.” Since the harvest of tobacco is such a physically demanding process, families cannot easily find workers for such tasks; hence they seek family members, who are in most cases young- sters. It is estimated that there are approximately 520,000 workers under the age of 18 working in Rio Grande do Sul, Brazil (Weissman, 1999).

The Employment Ministry Staff (EMS) is at- tempting to change things through giving seminars and presentations about the dangers that children face when they work. In addition to helping chil- dren avoid the negative, EMS is also promoting the positive through emphasizing the crucial role of education for children (Weissman, 1999).Despite the numerous efforts made to reduce the amount of abuse taking place, it is nearly impossible for authorities to limit these actions. Family members aren’t considered “workers”; hence this makes it difficult for authorities to follow up their abuse under the “business” legal jurisdiction. Further- more, the contracts that are being made between farmers and tobacco companies are not formally written, which also makes them really difficult to track. These reasons have been the main forces behind this ever-growing problem.

LEBANESE BACKGROUND

According to a study that was conducted by the Lebanese university, child labor became a seri- ous problem in Lebanon, especially that the rate is increasing (Hamdan, 2001). The study was conducted in 2001, yet, if we compare the reality of the Lebanese society during the past few years we can notice that not much has been changed and we are still faced with the same problem. If you walk down Bliss Street, you get surrounded by a minimum of 5 children urging you to buy from them gum. Likewise, if you pass through any car garage, you tend to see that the assistant is a teenage boy. The reasons that stand behind child labor in Lebanon could be associated to poverty, the social situation, and the economic situation in the country. According to Makhoul, the fam- ily situation of the children and the schools are two of the main reasons for children labor. The violence that the children are facing at both home and surprisingly schools as well create an unfa- vorable condition for the children to pursue their education (Makhoul, 2004). According to Daily Star, 32 percent of children of ages between 11 and 13 have dropped out of school. In addition, child labor does not constitute of only Lebanese kids but also Palestinians and Syrians who live in refuges and for, around 85 percent of children who are forced to work (Daily Star, 2009). Nevertheless, this condition is supported by poverty especially that some families tend to send their children to work in order to improve their standard of living, especially that there is no strict rule that prevent such actions. But how did the government and the Lebanese officials react to this situation.

Lebanese Government Actions

In 1946, Lebanon prohibited in its labor conduct certain workers whose ages do not match the job; yet it did not take further steps in elaborating on this law. Then in 1998, at the International Labor

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Organizations at Genève, the grouped countries raised the need for signing a declaration to work on preventing child labor, but Lebanon refused to join it. But in 1999, the Lebanese govern- ment moved a step further and agreed to sign an agreement in the Convention of the Arab Labor Organization that forced an age of 12 for education and increased the working age into 13 and later into 14. In addition, the government added certain restrictions about the amount of hours allowed and the permitted physical condition of the child to work. Unfortunately, all these laws, although announced, are not applied, and there are no strict measures are being taken to enforce them.

Just like any other developing nation, one of the most serious social problems faced in Lebanon is child labor. This issue is mostly concentrated in underserved poor neighborhoods of Lebanese cities, such as Beirut and Tripoli, and in rural areas like Bekaa. According to United Nations Children’s Fund, most children who work in Lebanon are males between the age or 14 and 17, which may be due to the society and the level of poverty. Generally speaking, a family in India or Pakistan might be more desperate than a family in Lebanon. Thus, in India for example all the children in a household, regardless of the age and gender, might be forced to work. Young children in Lebanon have jobs that require minimal skills where as older ones work in agriculture, heavy ma- chinery, and the service sector such as restaurants.

Although the head of the household’s gender does not affect the patterns of child labor, it is noticed that the proportion of working children within women headed households is usually high- est. This might be mainly due to the fact that the woman heading the household does not work. In addition, the education level of the household head of working children is not different from the educational level of working children themselves. This brings us back to the idea that the children will most likely follow their parents’ footsteps.

Hence, working children come from families that have received only a basic level of education or are even illiterate. Also, children are most likely to work in the same domain as their parents. For example, a father working in agriculture will most probably have a child working in agriculture also. The family size of working children is in general higher than the average family size in Lebanon as a whole. This means that a household in Lebanon that has working children will have at least 4 or 5 family members (UNICEF, 1996).

The Ministry of Labor formed the Unit for Combat of Child Labor in Lebanon to address the issue of child labor. As discussed earlier, their rules and regulations will not take effect if they are not enforced and there is a slight possibility that this unit is really protecting the rights of working children who are under the legal age.

Lebanese Case

The Lottery Girl Hasna is a 13 years old girl who sells lottery at the sidewalk of Beirut. Her story resembles one of the hundreds of stories that children are facing in Lebanon. It was difficult to interview the girl at first due to what we discovered later to be strict regulations given by her guard- ians. Hasna’s story began in one of the suburbs of Beirut. She was raised in a poor family in a Palestinian refugee along with six other siblings. She was educated in a public school until the age of 7 where she was forced to be drop out due to her family economic situation. This education that gave her ability to read and write might be the only one she would ever receive in her life.

At the age of 7, her father forced her to sell lottery tickets. At 7:30 am, a bus picks her up along with other kids not to school but to one of the sidewalks. She shouts as she walks the street with usual Baraka phrases: “God bless you” in an attempt to sell at least 15 tickets per day that are entrusted to her father everyday to avoid being

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beaten by him. It is easy to notice her pale and sad face trying to attract every individual that passes by her side. She would even chase after cars and cross roads just to sell one ticket.

When asked if she’d rather attend school rather sell lottery tickets, she mentioned that she enjoyed being around with kids of the same age learning something new every day that passes. Her dream was to be a princess. Although her dream is a fantasy, she wasn’t given the chance to enter the world of reality. The violence that Hasna is experiencing is not only limited to the physical abuse she is receiving from her father, but also violence against her spirit, and her per- sonal rights. International laws and even Lebanese law guarantee children with minimum needs of livelihood: safety, education, and food. Instead of being sent to school she is forced to work within a violent atmosphere and continuous threats that surround her.

All the violence that is taking place against children rights is not prohibited by the Lebanese government in practice although in law it is. She sells and begs around and no one takes the proper measures to ensure the preservation of her rights. The increase in child labor rates can be contributed to the lack of strict regulations enhanced by the government parties and by the lack of parental education about the importance of child educa- tion. Instead of families sending their children to work to get income, they should send them to public schools where government provides education for free, in order to build a prosperous generation who is able to pull the families from the miserable economic situation and thus de- crease poverty. As a result, the fight against child labor is rather a cycle of collaboration between

families and government parties who should put their efforts together to prevent the increase of the child labor rates.Moreover, a closer look in the farms of Lebanon reveals that agriculture is one of the biggest sectors for child labor, since labor is needed in vast areas for working the land and for harvesting. Similar to any case of child labor, Lebanon’s poverty is the primary driver of this vicious mechanism. To further support our argument, we will use the data gathered by the International Program on the Elimination of Child Labor (IPEC) which is part of the International Labor Organization (ILO, 2002) in Tables 1 and 2. The data was collected using direct observation of children working in the tobacco fields located in the Lebanese villages of Zawtar el-Charkiyeh, DeirKifa, Touline, Rmeish, Aitaroun. Within these villages, 128 working children were interviewed through easy questionnaires to which most chil- dren answered “Work is boring, tiring and hard” (International Labor Organization, 2002). This only proves that these children are living the wrong phase of their lives since childhood should be fun and easy.

It is estimated that in Lebanon 25,000 children who work in the tobacco fields are between 7-14 years old. Furthermore, approximately 90 percent of children who work in these fields are family members and only 10 percent are wage earners (International Labor Organization, 2002). This demonstrates the worst forms of child labor, that of which children work and don’t even get paid. Moreover, out of that 10 percent the majority of these children are earning less than half the minimum wage that is set by the government. In addition, children are seldom registered in the NSSF, which means they are deprived of health

Table 1. Age distribution of working children in tobacco cultivation in Lebanon

Age Bracket 3-6 years 6-9 years 9-12 years 12-15 years 15-17 years

Frequency Rate 5.5% 12.5% 21% 42.2% 18.8%

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care policies to support them when in medical need. Table 2 shows that Child labor is more likely to happen in the poor regions of a country and in Lebanon’s case South Lebanon, North Lebanon and Beirut Suburbs have the highest recorded activity of working children of both age groups. This can be clearly perceived when we compare the latter regions with Beirut and Mount Leba- non where a relatively lower activity is recorded (International Labor Organization, 2002).

OPINIONS

When wondering about the question, we tend to mostly blame this issue on families who tend to send their children to such practices, yet the blame is to be shared between the families and the gov- ernment. Families, especially in Lebanon, have passed through different decades of wars and even the economic situation is suffering a drawback. As a result, this caused families to send their children to work. In addition, governments didn’t take the appropriate measures. As a result, child labor was taken as an advantage by businesses and factories who forgot about the children rights and their minimum needs. .

From here, governments should establish more efficient rules and apply them and not just announce them. Moreover, there should be col-

laboration between the official parties, NGOs, and families to establish more efficient ways to reduce from child labor. This reduction will be established through increasing knowledge among people about the importance of children in our community. Child labor is not only an illegal act, but it is also an act against humanity that deprives children of their hopes. In addition, child labor threatens the development of the social community with the increase of the rates of uneducated children that will be raised with not only physical problems but also physiological ones. As a result, poverty will increase and we will witness negative future aspects such as prostitution. And all the children forced to work will stop dreaming because they know that there is no way to have their dreams come true. And on a later stage, the reputation of the country and its next generation will be more and more divided into classes the poor people, and the very wealthy and educated one. This will cause more unbalance and inequality among people.

Children on the street were flooded with fear inserted by their superior. Children were not only obliged to work, but they were also prevented from speaking about their condition. Their eyes were filled with fear as they were speaking scared that someone might come and hurt them. Child labor degrades the children from their minimum rights such as education, safety, education, and their rights of building hopes for future life. Working at an early age will affect them physically through the tired job they are exposed to; in addition, it will affect them physiologically through building fear and building a constraints from reaching what they want to accomplish even the simplest getting out of poverty.

International companies that claim to support human rights and fight against human abuse in their country were getting all their raw material from poor countries where children are excessively being exploited. In practice, the use of children in the workplace has become very common and profitable since children accept low wages and work for longer hours. Similarly laws exist, yet

Table 2. Economic activity of children and teenag- ers by geographic area in Lebanon

Children (Under Age 13)

Teenagers (Ages 14 to 17)

Beirut 3% 16%

Beirut Suburbs 2% 23%

Mount Lebanon 0% 14%

North Lebanon 4% 26%

South Lebanon 3% 27%

Nabatiya 1% 19%

Bekaa 4% 20%

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they are not enforced. In addition, child labor is an ignored aspect in Lebanon that is not taken seriously and more research should be done to discover the reasons that are behind this aspect and why there is no enough movement to abolish it. Child labor is a consequence of both government and parent’s lack of supervision on the importance of this aspect. As a result, more effort should be taken by the citizens to shed light on this issue and thus stimulate the government to take the proper measures to stop this phenomenon from increasing.

LESSONS LEARNED

Children who are entering the work force at a young age are suffering mental and physical abuse. But who is responsible for all of this? First parents play an important role where they consider their children as their assets that help them gain money. Meanwhile the government is enforcing laws, but these laws are too weak and result in failure. So in order to put a limit to child labor, certain steps should be implemented. First the government should prioritize primary education, where this education should be an obligation on all children, and free of charge. This way each child will have to attend school and get an education, and if they need extra income, they can have a part time job. Another notion to be considered is giving the jobs of these abused children to their adult relatives. That way, the family does not suffer, and will be better off. Adult wages are generally much higher than the wages of children and that will benefit the family as a whole. Another important step to take is to provide social services that help children and families survive crises, such as disease, or loss of home and shelter. Finally the government should play an important role, whereby it should enforce laws that protect children from being constantly abused. And for the government to strengthen these laws, it should apply a hefty fine that will prevent factories and different companies from employing children who are underage.

The school of thought that best suits the case of child labor is the Moral absolute. According to Aristotle finding the middle ground for doing things is the best way to live. In this case the mean is not depriving children from working and helping their families, but rather having the opportunity to work and help their families and at the same time having the appropriate education that is needed for them. Therefore finding a balance between the two extremes is essential for finding a solution to the problem. Hence there is a clear trade-off between two extremes, for at one extreme a child might get proper education but no sustenance in order to progress while at another, he/she child might get sustenance through working but become deprived of education leading to stagnation in the low social class. Humans tend to be more biased towards one extreme, but in order to overcome this dilemma, we need to be equidistant from both extremes. Thereby giving the child the right to get an education through studying and if time permits have the chance of getting a part time job. Nevertheless, it is crucial that the part-time job that the child occupies should not have any level of danger on him/her physically or mentally. Finally every child should at least have the opportunity to help his/her family and get a proper education at the same time. After all we are never born equal, and granting every child the right/potential to be equal is humanity at its best.

FUTURE TRENDS

Factors to be most significant in eliminating child labor around the globe are chosen from the World databank website. (Urbish, 2012). Child labor is a major part of discussion in any economic development, due to its sensitivity and all the outside forces affecting it. The subject is important, because child labor is a crucial stage of every country’s economic growth. All first world countries have experienced child labor at some point in their history. The relationship between

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the state-specific child labor legislation and the decline in child labor. Empirical strategy helps to identify the mechanism by which the legislation affects child labor decisions. In particular, besides establishing whether the legislation was effective or not, our analysis may determine whether the legislation constituted a benign policy or not, i.e., whether the legislation constrained the behavior of families (not benign) or whether it changed the labor market to a new equilibrium in which families voluntarily respected the law (benign) (Bugni, 2012).

CONCLUSION

Finally, after considering these two cases one might start to perceive the graveness of the problem, however this is only the tip of the iceberg. The figures that are expressed above are not by any means a definite indicator since children work- ing at home, which is mostly the case, and more precisely in the tobacco industry, are not taken into account as workers. Hence, the problem is significantly understated. Due to this fact, we think that there should be more intervention by the municipalities of these villages, since they are the closest form of authority to the villagers. In addition, Non Governmental Organizations should attempt to supply laborers of the legal age to replace the abused children. Furthermore, the Labor Union should conduct regular auditing visits to make sure the workforce has no under- age workers, along with the UNICEF who should present to the parents the potential success of their children if they are given the chance to excel like normal students. Finally, the government should encourage farmers to switch to safer crops like fruits and vegetables through promoting the farm- ers goods, thus decreasing the amount of harmful exposure children endure. Children under the

minimum age are being forced to leave everything behind and enter the work force. In other words they are being deprived of their right of educa- tion and childhood just to provide extra income for their families. The different components that make up child labor and caused its rates to rise are: poverty, government policy failure, high cost of education and living, parents who want more income, weak laws to protect these children and the wrong intention of factories.

REFERENCES

Bugni, F. S. (2012). An international analysis of factors affecting child labor. Cliometrica, 6(3), 223–248.

Daily Star. (2009, November 20). Lebanon child protection garners UNICEF commendation. The Daily Star.

Ensing, A. S. (n.d.). Hazardous child labor in Peru: Lessons from research. Academic Press.

Gunnarsson, B. L., & Orazem, S. A. (2006). Child labor and school achievement in Latin American. Oxford University.

Hamdan, A. S. (2001). General interest periodic- Middle East. United Nations International Chil- dren Emergency Fund.

Hobbs, S.S., & McKechnie, J.S. (n.d.). Child la- bor: A world history companion. Academic Press.

International Labor Organization (ILO). (2002). Lebanon: Child labor on tobacco plantations: A rapid assessment. Geneva: Consultation and Research Institute.

Kolka, T. I. (2002). The effectiveness of self- regulation: Corporate codes of conduct and child labor. University of Amsterdam.

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Makhoul, J. S., Shayboub, R. S., & Jamal, J. S. (2004). Violence. Journal of Children & Poverty, 10(2), 131–147. doi:10.1080/1079612042000271576

Presutti, J. L. (2010). Report: Over 100 million worldwide are child workers. Washington, DC: Voice of America.

Simpson, C. S. (2011). Victoria’s Secret revealed in child picking Burkina Faso cotton. Retrieved from http://www.bloomberg.com

UNICEF. (1996). Child labor in Lebanon. Beirut: UNICEF.

Urbish, L. S. (2012, December). International analysis of factors affecting child labor. The Busi- ness Review, Cambridge, 20(2), 223–229.

Weissman, R. S. (1999). Child labor in tobacco industry. Brazil: Academic Press.

KEY TERMS AND DEFINITIONS

Child: A human under a specified age by legal class under 16, under 11, etc.

Crime: A breach of the code of law in a par- ticular society, it is treated under several categories of severity and in various fields of law: commerce, civil rights, etc.

Poverty: Condition of deprivation from basic needs of life, health, education, experienced by individuals and extending across wide layers of society. It could be extreme, absolute, or relative depending on the economic status of each society.

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APPENDIX

Learning Objectives

L.O.1: Define child labor. L.O.2: Describe the effects of child labor. L.O.3: Discuss actions taken to defend child labor. L.O.4: Understand the reasons that cause the rise in child labor all over the world. L.O.5: List the reasons for child in Lebanon. L.O.6: List parties responsible for child labor. L.O.7: Infer proposed solutions to the child labor dilemma.

Summary

Define Child Labor

Child labor is the employment of children when they are under the legal age. The International Labor Organization (ILO) defines child labor as “some types of work” done by children under 15 years of age and states that it prevents them from getting educated and affects their health.

Describe the Effects of Child Labor

Child labor hinders children’s development and leads to severe effects on their well-being. Moreover, working children will tend to have a low level of education, and are more subject to crimes and drugs.

Discuss Actions Taken to Defend Child Labor

Many nations and social acts started to address this issue aggressively. Many acts developed to fight child labor. Moreover, Unions are joining with families and community organizations to fight child labor. Many workers in the U.S. and other countries are supporting efforts to end child labor by forcing alliances with unions in other countries that hold companies accountable for labor practices.

Understand the Reasons That Cause the Rise in Child Labor All over the World

The different components that make up child labor and caused its rates to rise are: poverty, government policy failure, high cost of education and living, parents who want more income, weak laws to protect these children and the wrong intention of factories.

List the Reasons for Child Labor in Lebanon

The reasons that stand behind child labor in Lebanon could be associated to poverty, the social situa- tion, and the economic situation in the country. The family situation of the children and the schools are

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two of the main reasons for children labor. Moreover, the violence that the children are facing at both home and schools create unfavorable condition for the children to peruse their education. No strict rules prevent such actions in Lebanon.

List Parties Responsible for Child Labor

First parents play an important role where they consider their children as their assets that help them gain money. Meanwhile the government is enforcing laws, but these laws are too weak and result in failure

Infer Proposed Solutions to the Child Labor Dilemma

There should be more intervention by the municipalities of villages, since they are the closest form of authority to the villagers. In addition, Non Governmental Organizations should attempt to supply laborers of the legal age to replace the abused children. Furthermore, the Labor Union should conduct regular auditing visits to make sure the workforce has no underage workers, along with the UNICEF who should present to the parents the potential success of their children if they are given the chance to excel like normal students. Finally, the government should encourage farmers to switch to safer crops like fruits and vegetables through promoting the farmers goods, thus decreasing the amount of harmful exposure children endure.

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Section 3

Country Applications and Case Studies

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Chapter 22

DOI: 10.4018/978-1-4666-7254-3.ch022

Organ Selling: When It Becomes a Business

ABSTRACT

Citizens of underprivileged areas submit to temptations and end up selling their organs for their great need for money. Some say that it is a personal choice and that each is responsible for making such a decision, while others believe that such a transaction is inherently unethical. In reality, the exchange of an organ for money does not end well most of the time. Quite often, the gangs and doctors receiving the organ fail to abide by the agreement leading to the ethical dilemma resulting from organ selling. Organ selling should never be legalized since there would always be a price war and its effects could not be confined. People by nature are greedy; thus, leading to black market again. Moreover, the demand is much more than the supply; thus, there is no specified criteria for who receives the organ as any method used would eventually lead to more complications.

INTRODUCTION

Organ selling has two forms. The first form is getting the organ from a needy person under his willingness and his acceptance. The second form is organ theft. This is when people are kidnapped, killed, and left without some of their organs. It is true that as humans we are free to make our own choices and decisions concerning how we live our lives and about our own ends. We have a fundamental right of “autonomy” or “self-rule”. However, is this also applicable when it comes to choosing to sell our organs? Does this autonomy

lead someone to give away a part of his body in return for money? Many questions come to mind when trying to deal with the issue of organs selling. This phenomenon is not new, but it is increas- ing nowadays to the extent that it has become a business. Many people, gangs, and even doctors are involved in selling live human organs. Such people are manipulating people’s mind and are taking advantage of their poor financial states. As a result, citizens of underprivileged areas submit to such temptations and end up selling their organs for their great need for money. There are several stories about people who became the victims

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of temptations, and thus sold their kidneys as it become their final resort to gain money. Many argue whether organ selling is ethically accept- able or not. Some say that it’s a personal choice and that everyone is responsible for taking such a decision. While others believe that it is unethical to do such a transaction. In reality, the exchange of an organ for money doesn’t end well most of the time. Quite often the gangs and doctors re- ceiving the organ fail to abide by the agreement and even sometimes threaten the misfortunate to sell their organs which leads to a free organ transplant. Let’s assume the best case scenario where the organ seller receives a full payment. The question aroused here is the portion of money used as medication to compensate for such a loss. The organ seller eventually ends up paying for medication and treatment much more than what he has received as a payment for selling his organ in the first place. We are living in a vicious world where selling an organ has become equivalent to selling a pair of socks.

BACKGROUND

Organ selling is a critical issue that should be dealt with immediately. Statistics show various cases of organ theft and selling around the world. Poor countries such as: Pakistan, India, South Africa, Brazil are usually the main victims of organ sell- ing. Rich countries such as: Israel, United States, Canada, Australia, New Zealand, Japan … abuse the weak financial situation third world citizens are in, and pay relatively low amounts to buy some of their organs. In India, about 2000 Indians sell their kidneys yearly even though the law banned such actions since 1994. Data illustrates that 1/5 of the kidneys transplanted worldwide came from the black market. The act of selling organs is be-

coming a regular practice; in fact, some brokers are earning as much as 200,000$ for matching an organ donor to receipt. Are human organs treated as business assets nowadays?

Iran is the only country that legalizes human sales, but they consider it organ sharing instead of organ selling. The government runs the whole operation and links the donor to the recipient. There are no private players involved such as brokers or any other intermediaries. Organ selling is also present in the United States, where a kidney traf- ficker was convicted of selling kidney transplants to customers for $120,000. He was paying the kidney seller in Israel $10,000 for their kidneys. The poor are being exploited in such cases; hence immediate actions are required to prevent these disgraceful acts.

More than a100 illegal operations were car- ried out at a hospital in Durban, South Africa between 2001 and 2003; thus, showing us that for the right price anything is possible even getting an organ. What a big shame it is that doctors are accepting bribes to perform the required surgery. Will people walk with price tags on them in the near future? Net care admitted that it had enrolled children to contribute their kidneys which were then transplanted into wealthy clients. This is an unethical act. The usage of innocent children as a means to help wealthy people is completely unacceptable. Aren’t all humans born equally? Why are some being deprived them of organs just because others are wealthier? Where is the government intervention?

Also, according to a report by CNN, human smugglers drug their victims and cut out their organs for sale to doctors in Egypt. The doctors and hospitals pay up to $20,000 for these black market organs. Those outrageous acts should be stopped immediately. An estimated 250 to 300 people in Bangladesh sell their organs for money

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each year. While in South Korea, 71 people were arrested in 2007, 18 in 2008, 9 in 2009 and 3 in 2010 due to organ trafficking.

Definition

Organ selling (also referred to as organ trade or organ trafficking) is the donation of bodily organs (such as the kidney, liver, heart etc…) in exchange for monetary reimbursement. This subject continues to raise controversial consid- erations due to its ethical implications. The first kidney transplant operation was performed 58 years ago, and since then, the process of trans- planting body organs from a donor to a recipient has drastically improved, going from “a highly speculative biomedical endeavor to a medically viable and often standard course of therapy” (Ber- man et al, 2008). At that time, the donors were primarily recently deceased individuals who have consented to donating their organs prior to their deaths. Living individuals would also voluntarily agree to donate their organs out of altruism. How- ever, the growing number of consenting organ donors was unable to keep up with the scores of people awaiting transplantation, which created a shortage of organs. In order to battle this shortage and meet the growing demand of organs, the idea of offering financial incentives surfaced amidst raging debates regarding its ethicality (Berman et al, 2008). In the context of the organ trade, the sellers of kidneys (or other organs) are no more donors motivated by altruism, but vendors driven by despair and motivated by monetary gain because they have no other means for supporting themselves or their families (Budiani-Saberi & Delmonico, 2008). Moreover, due to regulations present in several countries making organ selling an illegal practice, many individuals seeking the procurement of an organ travel across borders in what has been known as transplant tourism.

The United Network for Organ Sharing (UNOS) defines transplant tourism as “the purchase of a transplant organ abroad that includes access to an organ while bypassing laws, rules, or processes of any or all countries involved”.

STATE-OF-THE-ART

As previously mentioned organ selling raises serious ethical implications. Berman et al (2008) identify four main arguments against the organ trade which are:

1. The violation of the core principle in medi- cine of “do no harm”. In fact, Berman et al. explain that organ selling endangers the health and wellbeing of the donor, and thus comes into direct conflict with the Hippocratic Oath.

2. The organ trade in itself is an unfair practice because it inherently favors the rich over the poor. In Berman et al.’s view, the organ trade sets up a “two-tier system where the wealthy can purchase organs and the poor are coerced by financial incentives”.

3. The authors also claim that organ trading may in fact decrease the number of organs available for transplantation because the people adhering to social and religious norms that prohibit the trade would shy away and withhold altruistic donations.

4. Finally, the authors maintain that the selling of human organs is simply immoral citing the words of John Stuart Mill: “For if [an opinion] were accepted as a result of argu- ment, the refutation of the argument might shake the solidity of the conviction; but when it rests solely on feeling, the worse it fares in argumentative contest, the more persuaded its adherents are that their feeling must have

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some deeper ground, which the arguments do not reach; and while the feeling remains, it is always throwing up fresh entrenchments of argument to repair any breach in the old.”

Similarly, Budiani-Saberi and Delmonico (2008) expand on the issue of coercion that some organ vendors are subjected to by stating that “organ trafficking entails the transport by means of threat or other forms of coercion, of the giving or receiving of payments to achieve the consent of a person having control over another person, for the purpose of exploitation by the removal of organs for transplantation. The reason to oppose organ trafficking is the global injustice of using a vulnerable segment of a population as a source of organs”. The authors also affirm that turning human organs into commodities (also known as commodification) is itself immoral.

On the other hand, De Castro (2003) refutes the claim that donating organs in exchange for monetary compensation constitutes an illegal practice. She cites three main reasons for that rationale. These reasons are:

1. Castro rejects the accusation that engaging in organ selling turns human organs into commodities by stating that “the charge that compensation fosters “commodification” has neither been specific enough to account for different types of monetary transactions nor sufficiently grounded in reality to be rationally convincing”.

2. The author believes that altruism, although commendable, does not constitute a suffi- cient reason for donating organs “especially if there are good reasons to believe that significantly more lives can be saved and enhanced if incentives are put in place”. This is a clear indicator that Castro trusts that of- fering financial incentives in exchange for organs would contribute to saving a larger number of lives.

3. Thirdly, Castro rejects the notion that offering financial incentives in exchange for organs necessarily leads to exploitation. In fact, she believes that offering such incentives is “a necessity in efforts to minimize the level of exploitation that already exists in current organ procurement systems”.

David Rothman (2002) cites another reason that proponents use to justify the ethical validity of organ trade. The author claims that advocates of the practice pit “personal autonomy (the right for individuals to make their own choices) against paternalism (which obliges third parties to protect people from themselves)” as a rebuttal to the “Do no harm” argument. Rothman sums up the debate nicely by stating that supporters look for the sale of organs to solve a life-or-death condi- tion. Because the number of patients who have a very advanced level of renal disease and are waiting for a transplant exceeds by far the supply of organs, people who can’t make it regardless of dialysis treatment are going to die unless a kidney is obtainable. As a dialysis patient, who was also a member of the British Parliament, stated in a speech counterattacking a prohibition on trade of organs, “Those who want organs want them now because life is finite.” “Opponents, on the other hand, perceive sale as an egregious exploitation of the poor, a literal pound of flesh, whereby those without resources must sacrifice bodily integrity for those with resources” (Rothman, 2002). In 2002, Madhav Goyal et al published an article in which they studied the economic and health aspects of selling a kidney in India. Specifically, they measured the reasons for selling the kidney, the amount of money received from the sale, how the money was spent, the change in the economic status, as well as the change in the health status. There were 305 people surveyed in the city of Chennai in India, all of whom had donated a kidney in exchange for monetary remuneration. The results of the study revealed that the prevalent

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reason for selling the kidney was the paying off of debt. In fact, ninety-six percent of the respon- dents sold their kidneys in order to pay off debts that they had previously incurred, indicating the financial desperation of the donor-vendors. The average dollar amount received for each kidney was $1,070 and this amount was primarily used to cover debts, and to purchase food and clothing. The results also revealed that the average family income decreased after the operation, raising the number of participants below the poverty line. Additionally, eighty-six percent of the respondents experienced deterioration in their health status after the operation. Finally, a staggering seventy- nine percent of the donors responded that they would not recommend the procedure to others.

ORGAN THEFT IN LEBANON

From time to time, almost every day, we hear a lot of stories about murders, thefts and other crimes that violate human property in Lebanon. However, how often do we hear about organ theft in Lebanon? We rarely hear on the national news about organ theft and illegal organ selling. This doesn’t mean that Lebanon is free from this type of crime. In fact, it seems that organ theft and illegal organ trade numbers in Lebanon are big, however they are well hidden.

Middle Eastern counties in general, including Lebanon, are considered one of the most pros- pering black markets of organ theft. In addition, these countries seem to attract customers from non-Arabian countries especially Israel. Organ selling has two forms. The first form is getting the organ from a needy person under his willing- ness and his acceptance. What happens is that a lot of those people go to a dealer in the black market to try to sell their organs for money. The broker convinces poor people to sell their organs for a price ranging between 15000 to 30000 US

dollars. Finding such people is considered easy since about 30% of families that live in Lebanon are in poverty, earning less than $4 a day.

According to Farida Younan, national coordi- nator of National Organization for Organ Donation and Transplantation (NOOTDT), “the national waiting list for transplants includes about 800 kid- ney patients – they wait up to five years – 200 liver patients, and 200 heart patients”. The Lebanese government is failing to meet the Lebanese people needs when it comes to healthcare, poverty aids and benefits. It seems to choose the easy route, turning a blind eye to all the suffering existent in Lebanese society.

The second form is organ theft. This is when people are kidnapped, killed and left without some of their organs. It is surprising, because most of those are found in a perfect shape, so professional surgeons performed this operation. Lebanese market is well-known for offering weird things button actually reach a stage of offering forcibly extracted organs is quite shocking. In addition, researchers expect that crime rate will increase more in the next years.

A STORY IN THE US

In October 2011, in a New Jersey courthouse, one 60-year-old man pled guilty to selling human organs, earning more than 400,000$ for arranging the sale of three kidneys. He was the first person in USA to be convicted of organ trade with a sentence reaching up to 20 years of prison. He earned the title “matchmaker” through buying organs from helpless people in Israel and selling them to US patients. US attorney stated that forming a black market in human organs imposes a severe threat to public health, and ensures lifesaving treatments just to people who can afford it at the expense of less fortunate people. “We will not accept such an outrage to human dignity”. This scandalous

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act was revealed by an undercover FBI agent who met with the “matchmaker” in a basement in New York City. The agent requested a kidney for his sick uncle that was enlisted on the Philadelphia waiting list for transplants. In the conversation, it was claimed that lot of organs were being sold this way, and it would easily be possible to locate a man’s kidney suitable to this case.

As part of the arrangement the organ donors were brought to the US to undergo the surgeries. Israel’s medical association spokeswomen indi- cated that there are no Israelis selling their organs but if such deals existed then it is shocking. For someone who isn’t a surgeon, the matchmaker shown in recorded interviews that he had detailed knowledge regarding all kidney donations; knowl- edge such as how to trick hospitals to believe that the act was purely out of compassion and affection. Moreover, he said that the reason this operation costs immensely is because you have to pay various people to complete this operation. He defended himself claiming that there were three sick people suffering before the implant and that his acts resembled a holy miracle, by providing them with the necessary kidneys to save their lives. Now those patients are well and fit. In this case a conflict arises whether to legalize the trafficking of human organs or not.

To illustrate this dilemma, several opinions are considered. One kidney donor considers that the law was designed specifically to prevent a broker from lobbying people to sell their kidneys. On the other hand, the same law provokes brokers from breaking the law and gaining a massive premium instead of letting donors receive a price set by hospitals or insurers. Could the case of kidney trafficking be solved just by legalizing sales, and letting the market set the price? But the problem is that the demand of kidneys in the US (90,000) severely outweighs the supply of kidneys (17,000); thus, many people are dying while waiting on the list. Given the current situation, there is always

an incentive for black markets to exist. Especially that all medical procedures were conducted at dependable hospitals and that the people involved are professionally secured. One transplant surgeon stated that sellers are at a disadvantage since they are only selling their organs for the financial gain involved. As a result, any free-market system would never be balanced. Many brokers argue that religion is about helping others but here the case isn’t just helping others; it’s all about money.

A STORY IN LEBANON

In a small village in South Lebanon, Muhammad (not his real name) a newly-married man who lives in extreme poverty, sold one of his kidneys for $16,000. Because of his poor circumstances, and that he couldn’t find a job, Muhammad became desperate and ended up gambling and drinking. His wife lived with her parents. But they used to meet occasionally. When Muhammad found out that his wife was pregnant, he knew that covering the child’s expenses would be impossible. Therefore, Muhammad didn’t have another option except to sell one of his kidneys for $16,000. He took that decision in order to support his new family.

Muhammad had the surgery in one of the hospitals in the South which is not well equipped for such surgeries. The transplantation of the kid- ney took place on the same day as its extraction. After the surgery, he was paid the 16,000 dollars promised. Unfortunately, things didn’t go well with him. After a couple of days, Muhammad felt severe pains, and was sent to emergency. He was diagnosed with severe infections surrounding the surgery. As a result of that, Muhammad had to stay in intensive care for 10 days to recover. A second surgery was done to eliminate the infections that resulted from the second surgery. However, Muhammad didn’t have medical insurance that could cover the surgery expenses, thus he had to

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pay the full amount at his own expense. As de- scribed earlier, Muhammad lived in great poverty. Therefore he had no other choice but to pay from the money that he received from the sale of his kidney. The medical expenses accounted for more than the amount he had earned.

Settling the Dilemmas

What the matchmaker did is unethical and outra- geous. It deserves severe punishment. The truth behind his organ selling is not as he claims “helping others”, but only a utilitarian person who cares about making money regardless of methods used (abusing others). Moreover, since he is the first person to be convicted, then his punishment should be a lesson for others to come. At this juncture human lives are at risk, so who gives him the right to do so? He believes that he is a matchmaker and a savior. He thinks that money can control other people’s organs.

Many consider that selling a kidney selling, since we could easily live with one. Each organ has a specific function in life and shouldn’t be undervalued. This issue is getting way over control and many are considering organ selling as a new business to get into. Moreover, the poor are always being abused; thus, more protection and laws should be imposed to control organ selling. What part of the blame falls on government because they should investigate more about the people donating? And didn’t anyone wonder why an Israeli would donate his kidney to an anonymous American? Hence, more government regulations should be enforced when it comes to donating an organ. Organ selling should not be legalized since there would always be a price war and its effects couldn’t be confined. People by nature are greedy; thus, leading to black market again. Another reason is that the demand is much more than the supply. So according to what criteria does someone receive

the organs? Is it based on first come first served? Basically, any method used would eventually lead to more complications.

Muhammad’s story is a typical story of organ selling procedure. Its outcome is very similar to that of many poor people engaged in organs selling. It is common that poor people are the victims of such a deal. Muhammad was a desperate citizen living in extreme poverty, unable to find a job. He thought of selling his kidney as his final resort. People like Muhammad, are not even able to buy bread to feed their kids. These people mainly live in rural areas and remote villages. Despite a ban on organ trade, waiting-list patients are in dire need of organs, which is why is it easy for Muhammad to find a willing buyer. Those patients, who are in great need for organ transplant are willing to pay vast amounts of money to survive.

Was it worth selling his organ for the sake of getting money in return? It is certain that Muham- mad’s main incentive to give away his kidney was rather for his own benefit. The core of his decision to sell his kidney to others differs from those who donate their kidneys for free and out of charity. Yet, his plan did not turn out as expected, because unexpected events turned against him. His main aim was to earn 16,000 US dollars for selling his kidney, but instead of gaining, actually he ended up losing all the money to pay for the subsequent surgical complications. There are many miserable people engaged in the same business, but their stories remain hidden.

LESSONS LEARNED

Both stories show that people are willing to go to extreme levels such as selling organs just for the sake of money, which is disgraceful. There are always other ethical solutions to earn money. The act of exchanging organs for money means

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treating human bodies as commodities. It is irra- tional to believe that since you are the owner of the organ, then you have the full right to sell it to the highest bidder. This argument leads to a ques- tion: if you own your own body, is it reasonable to sell yourself to slavery? Human body cannot be treated as a commodity.

Unlike selling sperm or plasma which are simple, selling an organ involves high risk and with possible side effects, as shown in Mohammad’s case. His initial problem was poverty and ended up having an infection, showing us that human beings are not capable of making rational choices by themselves. This is why many laws should be applied to prevent similar cases from happening. However, it is painful, and can be dangerous. Be- sides that, the problem of post-operative infection remains which might lead to death, in addition to their abdominal muscles may never regain their former strength and elasticity. Moreover, one can- not guarantee that he can live with one kidney. Later on, any disease or a certain injury may be fatal and infectious to the seller.

FUTURE TRENDS

The need for human organs is growing due to the fact that the demand is increasing faster than the supply. This shortage can be solved in three ways: either reduce the demand for organs, increase the supply of organs, or do both at the same time. In order to tackle this issue, Gaston et al. (2006) proposed imposing stricter rules so that a smaller number of individuals in need of donation are placed on the waiting list every year. The authors realize however, that this step would entail further ethical considerations, mainly regarding priority. The current proposals suggest giving priority to younger, healthier patients (Gaston et al., 2006). As for increasing the supply, dismiss xenografting as a viable option in the near-future (Xenografting,

also known as xenotransplantation, is the act of transplanting living cells, tissues or organs from one species to another). They maintain that the only viable option is to increase the number of living donors. For that end, they made several proposi- tions that would mitigate the ethical implications of organ selling. These propositions are:

1. One-Year-Term Life Insurance Policy: Death benefit equal to $1,000,000.

2. Health Insurance: Medicare as primary or secondary insurer from donation until age 65 years or else qualified.

3. Settlement: Out-of-pocket costs related to donor assessment and/or nephrectomy.

4. Reimbursement: For inconvenience, ner- vousness, and/or ache $5,000 cash or $10,000 tax deduction.

CONCLUSION

Clearly the market cannot be relied upon to set the equilibrium price due to significant differentials between demand and supply. Therefore, black markets will always exist regardless of the place and country. There will always be a shortage in organs, irrespective of the method chosen. The only difference between selling an organ and donating one is the motive; those who donate are motivated by altruism; however, those who sell are driven by money. There will always be a debate whether to legalize organ selling or not. One should think twice before taking such a decision. It is neither the wealthy nor the middle class who are likely to take this decision. However, only the poor are likely to do it, and they do it out of desperation.

In a just society, no one ought to sell pieces of their body for the sake of other’s survival. In such a society, selling an organ could be an op- tion, but never a necessity. People should not be motivated by money to sell their organs. Money

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is nothing but a means to live a better life. But the presence of an organ is essential to living. So, what good will money do if an infection arises or if the transaction results in death? To live in any condition or to die, is a decision a rational human being should decide on. It is a simple decision of choice between quantity of life and quality of life.

REFERENCES

Berman, E. S., Lipschutz, J. M., Bloom, R. D., & Lipschutz, J. H. (2008, June). The bioethics and utility of selling kidneys for renal transplanta- tion. Transplantation Proceedings, 40(5), 1264– 1270. doi:10.1016/j.transproceed.2008.03.095 PMID:18589084

Budiani‐Saberi, D. A., & Delmonico, F. L. (2008). Organ trafficking and transplant tourism: A com- mentary on the global realities. American Journal of Transplantation, 8(5), 925–929. doi:10.1111/ j.1600-6143.2008.02200.x PMID:18416734

De Castro, L. D. (2003). Commodification and exploitation: Arguments in favor of compen- sated organ donation. Journal of Medical Eth- ics, 29(3), 142–146. doi:10.1136/jme.29.3.142 PMID:12796432

Gaston, R. S., Danovitch, G. M., Epstein, R. A., Kahn, J. P., Matas, A. J., & Schnitzler, M. A. (2006). Limiting financial disincentives in live organ donation: A rational solution to the kidney shortage. American Journal of Transplanta- tion, 6(11), 2548–2555. doi:10.1111/j.1600- 6143.2006.01492.x PMID:16889608

Goyal, M. S., Mehta, R. L., Schneiderman, L. J., & Sehgal, A. R. (2002). Economic and health consequences of selling a kidney in India. Journal of the American Medical Association, 288(13), 1589–1593. doi:10.1001/jama.288.13.1589 PMID:12350189

Rothman, D. J. (2002). Ethical and social conse- quences of selling a kidney. Journal of the Ameri- can Medical Association, 288(13), 1640–1641. doi:10.1001/jama.288.13.1640 PMID:12350195

KEY TERMS AND DEFINITIONS

Bio Ethics: The field of philosophical dis- course addressing the dilemmas of transacting business in the bio-genetic domain.

Blood Business: Monetary-based exchange of human body parts and of other human living organisms.

Organ Donation: Free approved free transfer of a part of a human body by the owner in life or after death.

Organ Selling: Sale and purchase of an in- dividual organ from a living, or near death body.

Transplant Tourism: Travel of a patient to a foreign country where an organ may be purchased and grafted through medical surgery.

Xenografting: Direct immediate transplant between a donor and a receiver.

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http://dx.doi.org/10.1016/j.transproceed.2008.03.095

http://www.ncbi.nlm.nih.gov/pubmed/18589084

http://dx.doi.org/10.1111/j.1600-6143.2008.02200.x

http://www.ncbi.nlm.nih.gov/pubmed/18416734

http://dx.doi.org/10.1136/jme.29.3.142

http://www.ncbi.nlm.nih.gov/pubmed/12796432

http://dx.doi.org/10.1111/j.1600-6143.2006.01492.x

http://www.ncbi.nlm.nih.gov/pubmed/16889608

http://dx.doi.org/10.1001/jama.288.13.1589

http://www.ncbi.nlm.nih.gov/pubmed/12350189

http://dx.doi.org/10.1001/jama.288.13.1640

http://www.ncbi.nlm.nih.gov/pubmed/12350195

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APPENDIX

Learning Objectives

L.O.1: State the forms of organ selling. L.O.2: Explain the ethical dilemma resulting from organ selling. L.O.3: Explain whether organ selling should be legalized or not.

Summary

State the Forms of Organ Selling

Organ selling has two forms. The first form is getting the organ from a needy person under his willing- ness and his acceptance. The second form is organ theft. This is when people are kidnapped, killed, and left without some of their organs.

Explain the Ethical Dilemma Resulting from Organ Selling

Citizens of underprivileged areas submit to such temptations and end up selling their organs for their great need for money. Some say that it’s a personal choice and that everyone is responsible for taking such a decision. While others believe that it is unethical to do such a transaction. In reality, the exchange of an organ for money doesn’t end well most of the time. Quite often the gangs and doctors receiving the organ fail to abide by the agreement.

Explain Whether Organ Selling Should Be Legalized or Not

Organ selling should never be legalized since there would always be a price war and its effects couldn’t be confined. People by nature are greedy; thus, leading to black market. Moreover, the demand is much more than the supply thus there is no specified criteria for who receives the organ as any method used would eventually lead to more dilemmas.

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Chapter 23

DOI: 10.4018/978-1-4666-7254-3.ch023

Real Estate Valuation Fraud

ABSTRACT

Valuation profession is a link between the borrower and the lender. Fraud is an intentional deliberate deception committed for illegitimate personal gain. There are several forms of real estate fraud, especially when the real estate market is facing a boom. The most widespread types of real estate fraud include the preparation of two sets of settlement statements, property flipping, and fraudulent qualifications. There are mainly three types of valuation to look out for. Valuation may be received from an unauthor- ized agency. Furthermore, a real valuation may be altered from the original to generate profit. Thirdly, intentional inflation of the value of a property will hide the real market value. It is usually difficult to spot real estate fraudulent activities, so deep investigations and professionalism is needed. This chapter explores real estate fraud.

INTRODUCTION

Fraud has been a major and an important topic in the business world. In its broadest sense, a fraud is an intentional or a deliberate deception committed for personal gain or to damage other individuals. Real estate fraud, on the other hand, is a narrowed topic that has been common lately. Real estate fraud refers to the act of any illegal activity with the purpose of misleading or misrep- resenting valuable information on a mortgage loan application or other real estate related documents involving the transfer of money. Real estate fraud is usually referred to as mortgage fraud, since fraud takes place at the mortgage application. In order for fraud to take place in the mortgage applica-

tion, one might overvalue his property. To do so, a valuer must appraise the property at a higher price than its market (actual) price in order to get a higher loan from a lending institution. Valuation profession is a link between the borrower and the lender. In this case the borrower is the one who wants to get a loan and the lender is the lending institution (ex. bank). Valuation fraud could hap- pen at any level of these three parties. As a result “Valuation or assessment” is the nucleus of real estate fraud. Heavy penalties, including large fines and imprisonment can carry with real estate fraud. (Hill, xxxx). There has been many ways in which someone could commit real estate fraud, especially when the market is facing an increase or a boom in real estate sector. Some types of real

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estate fraud are more common or seen more often because of their simplicity. Some other types are less often seen and are more complicated. Both are treated the same in the eye of the law.

BACKGROUND

One of the most widespread types of real estate fraud is the preparation of two sets of settlement statements. In the first statement, which is provided to the seller, contains the accurate or real price of the selling property. It reflects the actual market price. The second statement, which is provided to the lender, reflects an embroidered property price. When the buyer gets the approval of the loan that is reasonably higher than it must be, the excess of money is distributed among the connivers. Another common real estate fraud type is property flip- ping. In this activity a buyer attempts to purchase a property at a low price, and resells it quickly at a much higher price. This might sound legal, un- less when it entails false documents given by the buyer to the lender, it becomes fraud. Least but not last, fraudulent qualifications is also considered a type of real estate fraud. In this type of fraud, credit history and employment qualifications are fabricated by real estate agents in order to help buyers to become qualified buyer in the eye of the lender.

General History of Valuation Fraud

Valuation fraud is generally the hardest type of fraud to detect because even though a valuation may look valid in all its aspects, it may be a forg- ery. There are mainly three types of valuation to look out for. To begin with, a valuation may be received from a valuation company that is not authorized or registered to perform valuations. Furthermore a real valuation may be altered from the original form for numerous reasons, such as decrease taxes on a company or fool investors to

generate profit. Last but not least the third type of valuation entitles intentionally inflating the value of a property. Some are advocate of the notion that valuation fraud was more recurring in the past where companies had more freedom to operate. In fact, after the big business scandals, such as the Enron case and others, businesses are forced to hire external auditors because it is now a worldwide accepted fact that accurate financial reporting is important to an institution’s safety and soundness (Todd, 1999).

With so many constraints and regulation poli- cies, corporations and other individual lost the freedom of valuing their assets without being monitored, evaluated and corrected by a neutral third party. On the other hand, others believe that valuation fraud has never had such a big and nega- tive impact on the economy. The world has entered a global financial crisis in which the supply for money is outpaced by the demand for money. In other terms, banks and financial institutions were faced by a lethal liquidity crunch that shut many businesses out of the competition. A main reason for this collapse in the economy system can be tracked to the over or under valuation of properties, mortgages and real estate sites. Valuation fraud has undoubtedly added to the gravity and severity of this financial crisis. In fact, Whistleblower an- nounces that the incidence of property valuation fraud rose 46% in the third quarter compared to the same period a year ago. In addition, according to research, property valuation fraud increased by 25% in 2009 and it seems that the trend of shifting to fraudulent schemes involving real estate will continue in the near future. It seems that valuation fraud is becoming a well known type of business crimes as time evolves.

The world has been harshly exposed to this type of fraud in all its forms since 2008, the beginning of the financial crisis. Although as stated above, more prevention plans are being implemented to detect such fraudulent activities, it is sadly true that voracity and greed are quickly becoming ac-

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cepted norms in our new found world. To tackle the issue from an ethical point of view, it can be said that businesses worldwide do prioritize profits over the well fare of the economy as a whole. It might sound like a stereotype or a harsh point to make, but both research and the reality of things (financial crisis) show that there is a tradeoff between generating exceptionally high revenue and acting for the benefit of the global economical system, and it seems that businesses and valuation companies can be profit oriented above all else. Because real estate valuation fraud is skyrocketing since the year 2008, new prevention and aware- ness plans are being introduced to the market. First, many steps have been taken by the industry to guarantee that lenders and given relevant and accurate information on property valuation. This is particularly crucial when it comes to new-build properties where comparable in the market are rare. Second, in order to ensure a proper valuation and make sure that all pertinent information are in fact being disclosed, both customers and valuators must commit to a collaborative effort where they both take the necessary steps to come up with a proper valuation. Any one of the two parties can breach the written or unwritten contract by hid- ing, changing, twisting, falsifying or misleading information to over or under value the property in question for one reason or another. All these programs are being installed to decrease real es- tate valuation fraud as much as possible. It is fair to state that preclusion plans are popular in the western or developed world where the problem is more apparent. In fact, the US and the developed European countries were the nations that were ruthlessly afflicted by the financial crisis and taking corrective set of actions to detect, punish and abolish valuation fraud among other types of business crimes comes as a natural result. The United States constitution is periodically updated to make sure that business crimes such as valuation fraud are being penalized under the law. Statues specify penalties for crimes and a

recommendation for reforming criminal penalties would require corporations to stand criminally responsible under traditional criminal statues for any kind of corporation wrong. Meaning compa- nies who submit or conduct wrong valuation in hope to fool investors and generate more money can be sued and will face up to millions of dollars in fines and penalties.

Because it is hard to determine how much a corporation must pay for the committed fraud, i.e. what is the fair amount of penalty, a second recommendation advanced for the reformation of criminal penalties is that the penalties must cost the corporation as much as a bad business decision would cost. All these laws and regula- tions are efficient when it comes to protecting the general public against real estate valuation fraud. Nowadays the corporation or even individual spe- cialists conducting a valuation should weigh the pros and cons of lying about a certain property’s real value, they should determine whether such act will be worth it or not and the answer is not that blatant anymore. As the world evolves, there is really a very fine line between what is ethical and what is legal. In fact, unethical and illegal go hand in hand and unethical activities in the business world are quickly becoming treated as illegal actions. An attention grabbing idea is that the world of business is becoming more and more profit oriented but that at the same time, ethics have a key role in business operations and takes center stage in all business related issues. It would be rather safe to assume that in the future, real estate assessment fraud will know an inverse trend and start decreasing since there is clearly a lesson to be learned after all the financial chaos the world, specifically the western world, has witnessed.

REAL ESTATE VALUATION FRAUD

The financial crisis of 2008 did not hit Lebanon as sternly as it hit other countries. That may be

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discerned as an advantage but it can also be a dodgy indicator that the Lebanese economy is not affected by any external or worldwide events meaning the economy is still at its primary stages. Regardless of why Lebanon was not afflicted in the same way as the world, real estate valuation fraud exists in the country; in fact it has always been a part of the financial operations. As we saw in the two articles studied, property assess- ment is a recurrent event in Lebanon, whether it is over valuing a land to get a loan, over valuing a property to earn higher than deserve. Why has valuation fraud always been common in Leba- non? The most obvious reason can be found in the traditions, beliefs and norms of the Lebanese society. Although Lebanon has many qualities and plus sides, cheating and business crimes also occur frequently because of numerous reasons. To begin with, there are less prevention and detection programs in Lebanon. The Lebanese law is less strict than the US law which gives business people, specifically assessment specialists the “freedom” to act in a less conventional manner.

The elusive notion of freedom that assessment specialists live by, makes them believe that they can get away with wrong valuations. The number one factor for committing unethical actions is the belief that no one will find out about it and that our activities will go on unnoticed, this is at the root of our problem in Lebanon. If one believes that the chances of getting caught are very low if not non-existing, he/she will act based on his/her social and moral conscious. The tradeoff in this case is not making extra money versus receiving fair punishment but rather, generating higher profits versus committing an ethical crime that goes against our principles and ethical standards. Thus, it is clear that the issue of valuation fraud takes a different dimension when it comes to Lebanon. This brings us to the second point, is greed a key notion in the Lebanese society? Are Lebanese business people, concretely, real estate assessors, looking to serve their personal inter-

est before looking at the interest of the clients or the society as a whole? Is the Lebanese market a profit oriented one? “The man who has won millions at the cost of his conscience is a failure” (FB Forbes), is this quote something Lebanese people abide by or is the exact opposite of their beliefs? At this point, it is necessary to mention that studying the nature of the Lebanese culture is at the core of our problem for to understand the nature of valuation fraud; we need to scrutinize the mind frame of the people behind the profession. Although research has shown that real estate valu- ation and property assessment fraud has always been an issue in Lebanon, to determine the trend of this problem, studying the Lebanese culture is important. Cheating might not be a Lebanese norm contrary to popular belief, however, conformity is. To further illustrate this idea, suppose a real estate valuator decides to over value a company and was able therefore to make higher return on investment and generate higher net profits, other specialists in the industry will follow his/her foot- steps. It is easy for one successful case to generate enough positive vibe to become the trend or ideal of an industry as a whole. This is exactly how the valuation fraud started in the Lebanese market.

When lands started being overpriced and prop- erties overvalued, instead of the government and mainly the company in question taking corrective actions to prevent and stop such acts, it simply abided by the doctrine of conscious avoidance. A valuator’s boss may consciously try to avoid knowledge about the situation either to save the company’s reputation or to enjoy the extra ben- efits received from such fraudulent activities. It is palpable that the only consequences being considered in this case are the short term conse- quences because while hiding such unethical acts, the company may be able to save its reputation for the time being but only to create a bigger scandal in the future. Moreover, although valuation fraud has been present in Lebanon and has been in fact increasing at an increasing rate since the end of

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the civil war in 1991, the issue is being discussed in the open since 2001. Nowadays, as Lebanon is getting out from the political instability and economical recession, ethics are taking center stage in the country. Real estate appraisal fraud is being brought to the attention of the public and the government is starting to take control of the situation. When the country entered the 2006 war, real estate in the city went down drastically. As a result, after the war, many cases of over valuation occurred in order to rebuild the public’s faith and trust in the country and its reconstruction.

After this period of darkness in the history of Lebanon, the country was afflicted by a great period of political unsteadiness and shakiness. Nu- merous attacks targeting politicians and journalists occurred on an almost monthly basis which only enhanced the uncertainty of people concerning the future economy of the country. To recover from such great losses, real estate valuators aimed to mask the reality of things by over valuing proper- ties to restore confidence and get the country back on its feet. Whether the courses of actions taken were justifiable or not is not the core issue, the point is that valuation fraud arose and unethical measures were taken even if it is for a beneficial cause. Assessors and appraisal firms adopted the utility theory of ethics in stating that sometimes the ends justify the mean, in other words, by doing so, they were able to save the country and prevent a grim financial crisis. In the case of Lebanon, real estate valuation fraud increased at different points in time and was used for different reasons. While issuing wrong valuations can be targeted at in increasing profits, maintaining stability to a certain extend or trying to get needed funds/ loans to finance a certain project, it is lucid that the problem is at the core of business’s unethical behavior.

As stated earlier, discussing valuation fraud is receiving plenty of attention from government

officials to company owners. Although no specific prevention plans and detection programs are imple- mented, different companies across the country are in the process of deciding on an appropriate strategy to detect valuation fraud. Management in big assessment firms are working on increasing focus on both external and internal environment, assuring that the right penalties will be given to guarantee a fraud free working atmosphere. The execution of efficient, effective internal controls is a key management role, valuators do not enjoy the freedom they once had when assessing any piece of land or property, their work is checked and double checked before any disclosure is allowed. All these plans are likely going to decrease valu- ation fraud in the near future, although Lebanon might be perceived as a corrupt country, evidence are showing that this in fact is not going to be the case for much longer.

Dynamics and Intricacies

Valuation assessment is not as frequently dis- cussed as it should be, and besides, it presents an important ethical dilemma worth mentioning. Many thing of this issue as being a purely finan- cial issue, but like anything in business, there is always another side to thing, an ethical sidereal estate assessment is a fundamental tool used for many reasons. First, when potential clients apply for a loan, the bank or the lending institution has to run a statistical analysis making sure that the client in question can indeed repay his/her debt when maturity reaches. The probability of default of each client must be accurately and precisely calculated in order to decide on the interest rate that must be charged. Valuation is a key tool in this case because to see if the client in question is likely to default on his risk, you must measure and valuate his assets (including land, property, buildings and so on...).

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Another area where valuation is important is when potential investors are looking to invest their funds in a certain project. In this case, in a piece of land or anything related to real estate. The problem here is that assessors sometimes over value a property to make it look more desirable to investors. Trying to fool investors is an unethical act in itself and by doing so the valuator is putting his/her own interest above the interest of investors or the well being of the economy as a whole. A third case entitles the case discussed in the article we have discussed earlier in the work, when demolishing a building for a reason or another, it proper value maybe inflated to generate extra revenue and out of the ordinary profits.

To define whether there is an ethical dilemma to be considered, three questions must be asked. To begin with, is the issue we are dealing with legal; in our case is it legal to over or under value properties regardless of the reason. Furthermore, is the issue balanced, meaning is it fair to all parties concerned both in the short-term as well as the long-term? Is this a win-win situation for those directly as well as indirectly involved? It is evidently unfair to those investors who are financ- ing projects that are in reality more risky and less profitable than they have been told. Last but not least, ask himself/herself if what they are doing is right. Most of us know can distinguish the dif- ference between right and wrong, but when push comes to shove, how does this decision make you, as a valuator feel about yourself? Are you proud of yourself for making this decision? Would you like others to know you made the decision you did? This consists of the theory of morality and virtue ethics, meaning does the decision you are making or the valuation you are doing confirm yourself perception, or is it on the contrary, something that goes against your principles and ideals. Morality is a key issue in the case of real estate valuation fraud because handing in a wrong valuation is an depraved act that a valuator will not commit if he/ she based their decisions on the morality theory.

What then can be cause of assessment fraud? Maybe the ethical dilemma is worth restating before embarking upon this question. Should a valuator over value real estate to make extra money? And if he/she does it, where does the out of the ordinary profit go? Are these profits used for the general welfare of the economy or is the money spent on the valuator or assessment’s company personal interest?

What would make a valuator conduct a wrong valuation can be justified by the utility theory in ethics. If the chances of getting caught multiplied by the penalties that must be paid if and when caught are greater than the benefits received from the unethical act, chances are the assessor in ques- tion will not commit a valuation fraud. In other terms, it depends on the valuators expectations and perception of the situation. Just like any decision we make in life, being unethical in valuing real estate also enables weighing the pros and cons of a certain decision. It all comes back to how we see the situation unfolding in our minds; how we think things will turn out in both the long or short run. A valuator may decide to conduct a wrong assessment only after he made sure that “it is worth it”. If there is one thing to learn about ethics it’s that things, especially in the business world are not black or white, there is a large shade of gray. We can’t classify things as simply right or wrong because it all comes down to what we define as correct or incorrect, what are personal opinions are regarding a certain issue. A valuator will assess and measure the utility derived from overvaluing a piece of land or property and based on these results, will decide whether the decision is appealing or not.

The rewards versus the punishments are the first factor affecting an unethical decision, and the bigger the rewards are, the higher the probability of committing fraud. Even if overvaluing proper- ties can be done with “good intentions”, like the case of Lebanon post war discussed earlier, it is it a fraudulent act in itself, and the means don’t

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always justify the end. Trying to make profit at someone else’s expense is almost always an unethical crime, whether the profits generated are going to personal or community benefit. In addition, these cases where over valuation occur to help reconstruct a country are rare, most cases of valuation fraud are conducted for personal gains and unfair enrichment of an individual or a com- pany at the expense of others. In most valuation fraud cases, the valuator charges the client more money but the extra money goes to him directly and is not used for any public good. In fact, it is unethical because the client is not aware that he is being charged an extra fee, and in business any unjustified fees constitute an unethical if not illegal act.

While real estate valuation fraud may not be justified by the theory of morality or virtue ethics, it may however be rationalized under the utility theory as discussed above. Another ethical conjec- ture that can explain valuation fraud, specifically in Lebanon is relativism. As stated previously, Lebanon has a high conformity rate and people tend to follow the trend however unethical or im- moral these trends are. Ethical relativism is the theory that holds that morality is relative to the norms of one’s culture (Velasquez et al., 1992). So in this case, morality is not derived from personal or universal ethical standards but rather from the society as a whole. That is, whether an action is right or wrong depends primarily on the moral norms of the society in which it is practiced. The same action, in our case valuation fraud, may be morally accepted in one society but can be con- sidered to be morally wrong in another. In other terms, there are no standards that can be universally applied to all people, in all situations and at all times. The only moral standards against which a society’s practices can be judged are its own.

If Lebanon, or any other society thinks of greed and making profit at any expense as accepted norms, than cases of valuation fraud among other types of fraud are likely to occur and on regular, continuous basis. Research proved that societies

that put a significant emphasis on profit above all other factors, are likely to be afflicted by a higher business crime rate than societies who encourage and promote the welfare of the community and the normal functioning of the economy as a whole. In addition, if the valuators work for an assess- ment company, the corporation atmosphere and climate may be great indicator of the degree of ethics applied to the valuations. If the company has a superior code of ethics installed throughout all levels of the organization and if it values trans- parency, openness and honesty, employees of that company will less likely commits valuation fraud. The point here is that valuation fraud doesn’t only occur or not occur depending on society tradi- tions or values, the company the assessor works for attitude and perception is also crucial when analyzing real estate valuation fraud. Furthermore, whether conformity is a key norm in the society and/or company matters a lot and unravels a lot about the situation. If people are encouraged to blindly follow other professional’s actions in the business, business crime rates will increase. Also, if people or coworkers are reluctant about going to a superior when they find out about a valuation fraud case, the individual behind the unethical act will pursue his/her efforts in making illegal profits because he/she believes that they have the utter freedom to do so since no one will find out.

To put it in a nutshell, while under the moral- ity, virtue ethics and universal ethics, real estate valuation fraud is an unexplainable ethical crime, however under the theories of relativism and utilitarianism, this type of business crime can be defensible.

Real estate valuation fraud presents a com- plex ethical dilemma that creates a situation that involves an apparent mental conflict between moral imperatives, in which to obey one would result in transgressing another. Giving a right valuation is the moral thing to do but conduct- ing an overvalued valuation may sound like the better alternatives at times. To understand the ethical dilemma here, one must considers the

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possible conflicts of interest which could lead to fraudulent practices. For instance, considering the interest of the valuator versus the interest of the client is important here. How different are the two party’s interests? In other terms, how strong is the conflict of interest? The stronger it is, the more prone the valuator is to committing valua- tion fraud. However, if their interests are similar, the valuator will end up acting in the client’s best advantage since this means maximizing his returns at the same time. It is unambiguous however that in business, there is almost always a conflict of interest, and things are never as simple as they may seem. To mitigate the risk stemming from conflict of interest, it is essential that the valua- tor and/or the valuator’s demonstrate that there is no conflict of interest when they first take the instructions, or that any identified conflict of interest has already been drawn to the attention of the client. Other recommendations are made for improving the consistency and accuracy of building society mortgage valuations together with suggestions for ensuring that the valuator is truly independent, meaning he is not under any pressure to conduct a biased valuation to the benefit of a party at the expense of another. All these requirements are necessary to try to avoid valuation fraud. By making these adjustment in the valuation business, less unethical activities will take place, first because the assessor has less freedom, second because he is independent and working for his own account, and third because the conflict of interest is mitigated.

INTERNATIONAL CASE OF VALUATION FRAUD

A real estate fraud case could start as follows. A group of conspirators would approach a lending institution with the intent of obtaining a loan based on an overvalued property. The leader of the group could hire closing agents, appraisers, inves-

tors and other persons to assist in the fraudulent plan. The group of conspirators could give the bank overestimated figures of some property that they are going to buy. Documents are forged and changed in order to get a higher loan. Afterwards, the leader of the group turns out to be one of the owners of the lending institution. As a result mil- lions of dollars would be obtained from multiple fraudulent loans given. Most of the loans will go into default, resulting in millions and millions of dollars of losses to the lending institution.

Fact Scenario 1: Flip Transactions

A swindler organizes for a buyer, let us call him (buyer 1), to buy a property from a seller (seller 1) who is considered legitimate. Buyer 1 and seller 1 consent on an acquisition value of $300,000. The swindler and/or Buyer 1 retain a legal representa- tive A to perform on the purchasing deal. Then, the swindler arranges for a different buyer (buyer 2) to procure the exact similar property from Buyer 1 (who becomes seller 2 in the subsequent deal) at a selling price of $400,000. Legal representa- tive A has the right as well to act for both Seller 2 and Buyer 2 in the subsequent deal. Afterwards, Buyer 2 requests an elevated mortgage loan from the Bank (90% of $400,000) and the Bank agrees with Buyer 2 for a mortgage of $360,000. Upon closing, the amount of mortgage earnings collected from the Bank is greater than the sum necessary to close up the first deal. On the similar day or within a short notice, both deals will be closed. The minute the two deals are closed, Seller 2 and Buyer 2 notify the lawyer to modify the deal done by Seller 1 to illustrate a higher consideration of $400,000. Upon finishing the deal, a percentage of the mortgage earnings are utilized to complete the first transaction. The surplus in the balance is compensated and distributed between the swindler, Buyer 1, and Buyer 2. Once closing is accomplished, the swindler and Buyer 2 may live in or use the property for a certain point in time

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and pay the mortgage payments. The swindler may instead lease the property and use the rental fees to pay the mortgage payments. At a certain period in time the swindler or Buyer 2 stop paying the mortgage payments. The Bank will then put up the property for sale. The bank will be incapable of realizing the complete amount the buyer owes to the bank on the mortgage loan because it was overvalued by approximately $90,000.00 (90% x ($400,000 - $300,000)).

Fact Scenario 2: Misrepresentation of the Sale Price

A swindler consents with a legitimate seller to buy a property from him. The swindler and the seller agree on the purchase price of $150,000. A contract is signed by the two parties indicating a selling/buying price of $150,000.

After that, the parties sign a one page adjust- ment to the contract signifying that the buyer will be receiving a $60,000 credit upon closing for the possible improvements needed for the property. The swindler will not reveal the contract to the Bank. The swindler will submit an application to the bank for an elevated mortgage loan. The swindler is permitted a $135,000 mortgage loan (90% of $150,000). On closing, some of the mort- gage earnings are utilized to close up the deal and the remaining balance of the earnings are paid to the swindler. After the closing is completed, the swindler pays mortgage payments for a certain period of time and then stops. The bank will be incapable of realizing the complete amount the buyer owes to the bank on the mortgage loan be- cause the loan was overvalued by approximately $54,000 (90% x ($150,000 - $90,000).

Fact Scenario 3: Appraisers under Pressure

In this scenario, it is quite simpler to explain and draw the image of such a case. It is known that there appraising firms that hire appraisers to

work for them. The appraiser would be forced to overvalue the property and would his job would be on the line. “Why does this surprise anybody? Pressure on appraisers to ‘hit the number’ has been a standard of the real estate industry for years. As long as appraisers receive their work assignments from those who stand to gain financially by the transaction, the pressure will remain,” wrote in David L. Fry of O’Brien Associates Valuation Management in Santa Clarita, CA. In addition to that, there has been a study that showed that more than 55 percent of appraisers have felt a kind of pressure from either the lending institutions, the brokers, or even from their bosses.

EXAMPLE FROM LEBANON

Lebanon might have a different logic in real estate fraud. This is due to the fact that loans are harder to be approved on or obtained. Besides that, even if the loan was obtained, a high ratio-to-value loan could not be given as in the United States. As a result, people commit fraud in a different in a different way. The real estate sector has been and still noticing a boom during the recent few years. During this boom various cases of real estate fraud has happened. Three life stories that happened in Lebanon would make the image clearer:

The first live story happened few years ago, particularly in 2004. A swindler that was a well known real estate developer started selling apart- ments that have been not finished or even built yet. Buyers have been shown maps of imaginary apartments that had imaginary locations. Neither the land nor the apartments existed. The buyers were taken to a building site that has no relation to the swindler or even to the apartments that has been sold. The swindler even sold the same apart- ments for different people. He started taking down payments for those apartments that ranged from 20- 30% of the total price. Hundred thousands of dollars were accumulated by the swindler. After a lot of deals that swindler was caught and

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was sent to trial. The funny thing is that he only stayed for 7 months in jail and paid 2-3 million Lebanese pounds.

The second live story happened around the year of 1998. A swindler who was a real estate broker started buying and taking down payments for lands that were not real. The broker took the buyers to different locations and gave them low prices for some lands. Unfortunately, those lands weren’t for sale. The broker didn’t even know the owners of those lands. He took his brokerage fees in addition to down payments. The broker con- vinced the buyers that the owners of those lands were residing outside Lebanon and that he was responsible for selling them. After that, the broker ran away and no one has even seen him again. He was able to escape from justice. The file suit was closed and never opened again. Some people say that he had political and judicial connections.

The third live story is similar in one way or another to the previous two scenarios. In this case a real estate developer had a land and he wanted to invest in it. Unfortunately, he had no sufficient cash to develop a building on it. So, he made a plan of a building and started selling those apartments. People were supposed to get their apartments after a 24 months period. Unluckily, the building took 5 years to be built. The developer took the down payments and invested them in other projects. This case is considered as fraud, because the developer used the money for a different intention without the knowledge of the buyers. Nevertheless, the developer didn’t comply with the contract that stated a 24 months delivery time.

POSSIBLE SOLUTIONS

As we mentioned in our paper, real estate fraud can occur in many different ways. The fraud can’t be easily recognized, even if the indicators show that fraud is being committed. Real estate fraud recognition depends on the conditions of the in-

dividual matter or the transaction itself. In order to avoid real estate fraud you should be more than knowledgeable about the other parties involved. You should carefully study each transaction and its outcomes. You simply have to become the guard of yourself. Following such criteria would help:

• Have no suspicion about the other parties; if you have then you should be doing fur- ther inquiries about the client, subject mat- ter, and think of the results of your act.

• Make note of any complicated or unusual transaction that takes place.

• Make further effort to knowing the seller/ client.

• Always make it possible to attend the sign- ing of the closing of the transactions.

• Make sure of the lawyer’s identity genuineness.

• Notice red flag indicators. • Review documents carefully before

signing. • Inform the lending institution of any flip

transaction. • Inform the lending institution of any

changes in the contract that the lender upon had agreed to give the loan.

• Information of the purchasing transaction should be consistent with the information of the mortgage commitment.

• Surpluses in mortgages should be reported in advance.

Some Basic Steps That Could Be Followed to Avoid Appraisal Fraud

• Hire Your Own Appraiser: The money you will be paying for the appraiser is worth to be known that it will a legitimate source to rely on. At the end you don’t want to end up in jail.

• Use Ethical Decisions: Upon choosing your appraiser, be ethical seeing that the

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harshness of the problem is not an easy task. Check and ensure that the hired ap- praiser is state licensed.

• Ask for Previous Working References: It is better to be hiring an appraiser that had been working for a bank than an appraiser that had worked for a mortgage broker. At the end banks are more likely to hire expe- rienced, principled, and ethical appraisers.

Value frauds can be reasonably complicated transactions with sufficient and adequate turns and twists to keep even the most careful lawyer from recognizing the fraud. A lot of carefulness and consideration should be taken and followed to omit any reasonable doubt of you committing real estate fraud in general and valuation fraud in specific. consider all consequences and outcomes. Besides that, be as clear as possible when it comes to documents and transactions done. What’s more compelling is that we are observing broader law enforcement efforts to restrain mounting levels of real estate valuation fraud. Nevertheless, law enforcement has initiated to take a closer look at exaggerated or overstated assessments in its con- centrated effort on fighting real estate fraud. At the end the most responsibility lies on the consumer. “It’s really a research project on the part of the consumer,” says Greg Dennis, president of Land Safe Appraisal Services.

FUTURE TRENDS

Valuation fraud has always been common in Lebanon due to several reasons:

1. Traditions, beliefs, and norms of the Lebanese society;

2. Less prevention and detection programs in Lebanon;

3. The Lebanese law is less strict than the US law which gives business people freedom to act in a less conventional manner; and

4. The belief that no one will find out about it and that our activities will go unnoticed.

New prevention and awareness plans are being introduced to the market as steps to prevent real estate valuation from skyrocketing:

1. Many steps have been taken by the industry to guarantee that lenders and given relevant and accurate information on property valuation;

2. In order to ensure a proper valuation and make sure that all pertinent information are in fact being disclosed, both customers and valuators must commit to a collaborative effort where they both take the necessary steps to come up with a proper valuation;

3. The US and the developed European are taking corrective set of actions to detect, punish and abolish valuation fraud; and

4. In order to avoid appraisal fraud, hire your own appraiser; use ethical decisions; and ask for previous working references.

According to Martin (2011), mortgage and investment fraud are very high and there are severe costs for evaluators who involve themselves in wary dealings. Dishonesty in deceitful arrange- ments regarding commercial properties and land are shown in numerous conditions that have the potential to abuse the evaluation process for false drives. Evaluators who can perceive scheme are able to guard themselves from depending on in- correct information which can compromise the assessment examination. For the evaluators to stay out of trouble, they ought to think critically and challenge all available assumptions.

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REFERENCES

Anonymous. (2004). Legal information and sup- port. The Law Society of Upper Canada.

Anonymous. (n.d.). Real estate/mortgage fraud: Facts, figures and closed cases. Retrieved from http://www.irs.gov

Ghillyer, W. A. (2009). Business ethics: A real world approach (int. ed.). New York: McGraw- Hill.

Jennings, M. M. (2006). The legal, ethical and global environment of business (8th ed.). Uni- versity of Arizona.

Law Society of Upper Canada. (n.d.). Real estate fraud being creative and fighting back. Author.

Martin, V. (2011). The international appraiser: Objective valuation advice on international com- mercial real estate. Academic Press.

Perkins, B. S. (2005). Appraisal fraud remains hot topic. Academic Press.

Real Estate. n.d. In Lebanon opportunities. Aca- demic Press.

Smith, G.S. (2002, July). Time stands still. Ex- ecutive.

Todd, K. (1999). Interagency policy statement on external auditing programs of banks and savings associations. Federal Register, 64(187).

Velasquez et al. (1992). Ethical relativism. Issues in Ethics, 5(2).

KEY TERMS AND DEFINITIONS

Deception: Causing disappointment through a deliberate pursuit of providing half-truths and near-truth lies.

Estimation: A calculation of possible unreal values should the parameter come real.

Lending: Providing funds in return for inter- est revenue paid in addition to the return of the initial sum.

Real Estate: Properties that are immobile in space such as land, factories, and residences carrying specific market value subject to market conditions.

Valuation: Assessment and assignment of a numerical measurement representing the business value of a business concern.

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APPENDIX

Learning Objectives

L.O.1: Define fraud. L.O.2: Define real estate fraud. L.O.3: Describe ways in which real estate fraud could be committed. L.O.4: List the three main types of valuation that one must look out for. L.O.5: List steps that were took to prevent real estate valuation from skyrocketing. L.O.6: Describe where Lebanon stands in valuation fraud. L.O.7: Explain how you can avoid appraisal fraud.

Summary

Define Fraud

Fraud is an intentional or deliberate deception committed for personal gain or to damage other individuals.

Define Real Estate Fraud and Valuation Profession

Real estate fraud refers to the act of any illegal activity with the purpose of misleading or misrepresent- ing valuable information on a mortgage loan application or other real estate related documents involving the transfer of money

Valuation profession is a link between the borrower and the lender.

Describe Ways in Which Real Estate Fraud Could Be Committed

There has been many ways in which someone could commit real estate fraud, especially when the market is facing an increase or a boom in the real estate sector. One of the most widespread types of real estate fraud is the preparation of two sets of settlement statements, property flipping, fraudulent qualifications.

List the Three Main Types of Valuation That One Must Look out For

There are mainly three types of valuation to look out for. To begin with, a valuation may be received from a valuation company that is not authorized or registered to perform valuations. Furthermore a real valu- ation may be altered from the original form for numerous reasons, such as decrease taxes on a company or fool investors to generate profit. Last but not least the third type of valuation entitles intentionally inflating the value of a property.

List Steps That Were Taken to Prevent Real Estate Valuation from Skyrocketing

New prevention and awareness plans are being introduced to the market.

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• Many steps have been taken by the industry to guarantee that lenders and given relevant and ac- curate information on property valuation.

• In order to ensure a proper valuation and make sure that all pertinent information are in fact being disclosed, both customers and valuators must commit to a collaborative effort where they both take the necessary steps to come up with a proper valuation.

• The US and the developed European are taking corrective set of actions to detect, punish, and abolish valuation fraud.

• The United States constitution is periodically updated to make sure that business crimes.

Describe Where Lebanon Stands in Valuation Fraud

Valuation fraud has always been common in Lebanon due to several reasons:

• Traditions, beliefs, and norms of the Lebanese society. • Less prevention and detection programs in Lebanon; the Lebanese law is less strict than the US

law which gives business people freedom to act in a less conventional manner. • The belief that no one will find out about it and that our activities will go on unnoticed.

Explain How You Can Avoid Appraisal Fraud

• Hire your own appraiser. • Use ethical decisions. • Ask for previous working references.

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Chapter 24

DOI: 10.4018/978-1-4666-7254-3.ch024

Illegal Drugs in Lebanon: Recreational or Medicinal…

Who Is the Victim?

ABSTRACT

Based on utility, Lebanon is pursuing illegal drug trade activities for the monetary value they offer. The ethical dilemma is that Lebanese law prohibits drug plantation, yet the government is implicitly encouraging these activities, thus the contradiction and the corruption dilemma. On a pharmaceutical and economical level, drugs have a positive outcome, but on a recreational and abusive level, drugs can be very harmful and sometimes deadly. They are not dangerous because they are against the law; they are against the law because they are dangerous. Lebanon should legalize some drugs, the ones that have minimal negative effect on consumers. Therefore, Lebanon’s economy would still benefit monetarily from this industry, while making the life of the farmers much easier, and maybe give the chance to poor rural areas to offer security and a moderate level of living. This chapter explores illegal drugs in Lebanon.

INTRODUCTION

The original drugstores go back to the Middle Ages prior the 18th AD. The first drugstore was created by pharmacists from Baghdad in 754. Following this, other drugstores were opened during the medieval Islamic world and ultimately primitive Europe. In the 19th century, several drugstores in both Europe and the United States had become bigger pharmaceutical firms. The greatest findings

in the 1920s and 1930s started being largely manu- factured and circulated. Regulation was passed to check and agree on drugs and to necessitate proper labeling. Both prescription and non-prescription drugs were lawfully separated from each other upon the growth of the pharmaceutical industry, which progressed even further as a result of the adoption of systematic scientific methods, study- ing of human being biology and using advanced industrial procedures.

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DEFINITIONS

Hashish

It is the viscous exudates of the hemp plant (Cannabis). Like all other drugs, it’s a chemical substance that affects a bodily, intellectual, expressive, or communicational aspect in a person. All drugs are considered unethical and are still considered as a taboo in the Lebanese society. Nevertheless, different types of drugs do have different consequences on the consumer; some are more harmful than others. In the end, all drugs are harmful and there is no right way and absolute solution to this deal with this is- sue. Nonetheless, the most realistic option and viable alternative is one that has been adopted by most industrialized countries which is legal- izing or tolerating hemp.

Hemp

Hemp is a powerful, bush-like plant with loved, seven-finger leaves. It’s a family of plants, some of which, according to archeological evidence, are used to make rope and strong rough cloth and others of which are used to get the drug canna- bis. All hemp-based drugs except Marijuana do not contain TetraHydroCannabinol (THC) which is a psychoactive substance. Hence, the effect and consequence of hemp is not as harmful as any other kind of drugs.

Ladinin

“Ladinin” a drug which contains an active in- gredient “ciprofloxacin”. This ingredient has a pharmacological act of broad-spectrum anti- microbial drug of fluoroquinolone collection with bacterial act.

GENERAL BACKGROUND OF RECREATIONAL DRUG USE

Generally, humans enjoy feeling happy and good and the use of drugs makes this happen. This could either be lawfully done with several kinds of drugs like nicotine, anti-depressants and caffeine or illegally done with a range of illicit drugs such as ecstasy, heroin and amphet- amines. Nicotine is the psychoactive constituent of tobacco. Cannabis has been used by nearly every culture in history. It was first used when cannabis seeds were used in China as food. Then, it was spread all over the world since humankind was using it for religious, medicinal and recreational purposes. There was a movie in 1936 called “Reefer Madness” in America that showed young people raping and murdering under its influence.

As for the opiates such as opium, morphine and heroin, some evidence shows that Neander- thals have used poppy seeds as food. In 1300 BC, the Egyptians used to cultivate opium poppies in order to trade them into Europe and Greece across the Mediterranean. Afterwards, Arabs, Romans and Greeks used it as a soporific and sedative. India cultivated, ate and drank opium for several purposes like increasing soldiers’ courage and it was seen as a household remedy. Opium was reintroduced in 1527 as laudanum which means that it was mixed with alcohol. The British, during the 18th Century were making money due to the trade of opium from India all the way to China but the Emperor of China banned this trade.

He forbids this trade to block the rise of dependent handlers. Here’s when the British don’t give China a choice other than keeping the opium flood coming in.

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The use of opium in the 19th century was considered as a patent medicine that was increas- ing in Europe, the United States and in England for a larger choice of ailments; sometimes it was used as a sedative for the children. Morphine was introduced in 1803 and was isolated from pop- pies; it was lauded as a very good medicine due to his reliability, safety and long-lasting effects. However, in 1898, heroin was then introduced as a substitute to help the morphine addicts. Unfortunately, it turned out that both substances were equally addictive. In the early 1990s, heroin became a leading illegal narcotic and a world drug. Moreover, the most commonly used drug in the United States is Marijuana. It’s a dry mix of flowers, seeds and leaves of Cannabis Sativa; it is smokes either in a pipe or as a cigarette. It is also called hashish in a more concentrated form. There are several side effects which are either on the short-run like rapid heart beatings, eyes become red and enlargement of the bronchial passages or on the long-run such as respiratory problems, lung infections chest illness and obstructed airways.

Cocaine, is a drug that is derived from the leaves of coca, it is used usually as a medicine and as an anesthetic. It is found in the Coca Cola drink along with nicotine. It became a popular medicine that helped curing many illnesses and diseases. However, reports in America showed that this drug was the origin of several crimes. Besides, in 1887, Amphetamine was first synthe- sized in Germany and was first sold as a treatment for nasal congestion. Many years later, doctors have succeeded in treating narcolepsy and children with attention deficit hyperactivity dis- order ADHD; it improved their performance and concentration. Also, it was used in the military service in order to keep the soldiers energetic and awake. Even though these drugs were syn- thesized in the name of medicine and science, they will undoubtedly be used recreationally

by many people. he drug dynamics which are pharmacodynamics describe what the drug does to your body, its side effects. There is the therapeutic effect of the drugs that relieves one from his pain and reduces his blood pressure. As it also describes the site and the mechanism which involves where and how the drug acts on one’s body; the effect can be influenced by several factors such as the age of the person, the genetic makeup and some other conditions that the person has medically other than the one he is treating.

Throughout history, the use of drugs by hu- mans has been a way to play with the pleasure centers of the brain. An immense variety of drugs were synthesized during the past century in laboratories worldwide. Heroin, cocaine and most illicit recreational drugs were known as a “wonder cure”. Also, heroin was enthusiasti- cally used anywhere in the world to treat many diseases which are respiratory or sometimes it can be used against the addiction of morphine. Progressively, people started noticing that heroin wasn’t so good. Many patients, when the drug was taken away from them, showed signs of addiction and bad withdrawal symptoms. In 1931, heroin was banned which left an addict generation to turn to black markets. In the 20th century, governments started taking actions towards the drug use and banning them, they even made their supply, trade and use a criminal offence.

However, with the globalization, the govern- ments realized that the use of drugs can’t actu- ally be banned. In Australia for example, they encouraged a “harm reduction” move in which the use of illegal drugs is neither prohibited nor promoted but their support and services are en- suring that the drug use is minimized. The drug use history shows that humans will continue to use drugs even though they have been using

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it for a long time; the government should take this fact into account when trying to solve this issue. The United States and the United Nations Office has chosen a common approach which is to watch nearly the drug trade and try as much as possible to forbid it because drugs, accord- ing to them, should be made illegal. This would lead to additional costs in the law-enforcement and in the abundant prisons in the countries who have adopted this approach too. However, the Netherlands has taken another approach and partially made some “soft” drugs legal in a diminutive proportion. This had attracted many tourists to go there in order to get some substances; it is called the “drug tourism” effect.

Governments in the third world are fre- quently destabilized by the corruption and violence resulting from the trade of drugs. There are two major legal drugs which are alcohol and tobacco that are very dangerous too and can kill more people than any other illegal drugs. Even though they are regulated, they won’t stop put- ting huge strains on social systems like health services and the police. Recreational drugs have their advantages and disadvantages. On a pharmaceutical and economical level, drugs have a positive outcome but on a recreational and abusive level, drugs can be very harmful and sometimes deadly. They are not dangerous because they are against the law; they are against the law because they are dangerous.

ILLEGAL DRUGS IN LEBANON

Lebanon is a major player in the drug-trade industry in the world. It produces and markets drugs to the whole world but mostly to the Middle East and to Europe. The Red-Lebanese Hashish is very well-known all over the world for being A-Class hashish. It is recommended to all users and they ask for it specifically. Syria plays an important role in controlling and enabling the drug-trade. Due to this trade, both countries

make millions of dollars yearly in profit. Lebanon and Syria were on the main list of drug growers and exporters of the United States. Then they were removed from the list in 1997 because they claim that Lebanon has experienced a remarkable reduction in the production of drugs. Second, there was no proof that these drugs are making it to the United States’ market. Finally, Lebanon and Syria have been launching campaigns against this while also improving their ties with the American agencies fighting these trades.

This ethical dilemma is based on the theory of utility: Lebanon is pursuing these illegal activities for the monetary value they offer. Another ethical dilemma is that the Lebanese law prohibits the plantation of those drugs yet the government is aware and is encouraging these activities; thus the contradiction and the corruption. The Lebanese Government was encouraging illegal drug trade activities to boost their economy on one hand and to pay up their debts on the other hand (Highs and Lows, January 2003, Executive). At this point, the U.S. Embassy interfered by paying a sum of 600,000$ for the Lebanese to destroy their crops. Even though it’s not for the right cause (which is the U.S. fear that the revenues from Lebanon’s hash crops will flow into the pockets of Hezbollah who they consider as “terrorists”), it’s still considered as a first positive step forward given that many Lebanese people were affected negatively (they either became addicted or they were incarcerated).

During the wars from 1974 to 1992, Lebanon was one of the biggest producers and export- ers of hashish. Not only hashish, but many other kinds of drugs were produced all around Lebanon. According to Dr. Jihad Albani in the article “History of Drug Trafficking in Lebanon and Syria”; the Valley of Becharre in the North Lebanon was among the worldwide capitals that produced drugs.

Bekaa is known for its very fertile soil and hot sun that help in growing such crops has a long history in drug growing followed by harvesting

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and lastly selling. The Lebanese Government has been launching anti-drugs campaign to fight these trades. Nevertheless, Lebanon is not exactly a “secure and stable” country. The Lebanese Government’s focus on these activi- ties has been somewhat limited due to all the events that occur (wars, political instability, as- sassinations, etc…). Moreover, the farmers and the trade people involved in these activities are powerful to the point where the Lebanese Government’s intervention is limited.

Over the years, Government has attempted to, and sometimes succeeded in destroying large acres of crops. However, they never succeeded at completely eliminating these crops. In the article “Struggling Lebanese farmers return to illegal crops”, some excuses were given to plant such harmful products. One reason was that people were hungry and wanted to feed their families. Lebanon was one of the high listed drug-producing countries on the United States’ list. Approximately 150,000 acres of prohibited crops were planted in the mid 1980s and in summer of 2001 an estimated of 37,000 acres were planted which gives a justification for that rating. Drugs are both exported and sold inside of Lebanon.

Not only farming drugs were spreading in Lebanon but there was a wide spread of prescrip- tion drugs too. In the health ministry they believe that doctors and pharmacies help patients get their hands on these kinds of medications even if they are not in need of them. Doctors get bribed to write such drugs on prescription papers or patients can go directly to illegal pharmacies and get whatever drug they would like. These drugs include euphoric pills, anti-depressants and strong sedative sleeping pills.

The government intervened to limit these massive figures of exporting and local selling of both medical prescription and recreational drugs that are grown by farmers. The government tried

to introduce to the farmers all kinds of alternative crops to grow to stop them from growing drugs. The problem was that crops such as sugar, potatoes and wheat don’t generate as much money as selling hash or marijuana. Another study was launched by an agronomist named Hassan Makhlouf in 1999. He lived in Paris for 12 years. Makhlouf (2001) performed a widespread research on alternative crops that generate good money. He found that pistachios, saffron and capers are expensive crops. According to his study one hectare can be sold for $2,000 to $3,000; on the other hand one hectare can be sold for $4,000 to $8,000. For these farmers to start such projects they need a big investment requiring help from government. Makhlouf pre- sented his study to the antidrug squad in Lebanon but after two years he was still hoping to get hired officially (Struggling farmers, 2001). Donors all around the world also tried to help aid those farmers by donating $300 million dollars in total for these farmers to switch to other crops. Unfortunately not all the money was delivered. Nasser Serjani from the UN development Program told BBC news that the government only got $3million that would only satisfy 1,500 farmers. This means that 95% of the farmers did not receiver anything. Without these loans farmers will not be able to switch to other crops and will grow hash again to survive.

Farmers’ Dilemma

The following case mainly represents all aspects of the ethical dilemma that exists between the farmers and the Lebanese Government, as well as the consumers. It was documented by Mitchell Prothero (2009) and published in The National on July 01, 2009. The article “Lebanon’s drug barons vs. the law: a battle for survival” talks about the main battle that exists between the Lebanese Government and the growers of the illicit drugs. While the Government claims to be trying to control these “militias’” activities,

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the growers argue that they have no other al- ternatives. One of the leading hashish growing families in the Bekaa has been clashing with the Lebanese army for years, but during the sum- mer, while the army was destroying the crops, they were contacting the Military Intelligence Officer trying to negotiate truce. Nevertheless, the Military Intelligence Officer decided not to interfere and to leave it in the hands of the army. Families have lost their crops, and their houses. They describe the Government’s act as cruel because they don’t even support the develop- ment of these poor rural residents nor do they try helping them. Aid has been mentioned but barely acted upon, and hashish planting is their only way of survival.

A family elder who is a leading drug dealer was claimed to be executed by the army. He claimed that his family members have close relationships with some high figures in the Government who do facilitate and enable this trafficking to take place. Even though the Military Intelligence Officer is aware of the fact that the Lebanese Government has failed to support these poor rural areas, he still denies the fact that these farmers are only growing hashish to be able to survive. He declares that these people have visas and passports that enable them to access many countries over the world.

To exemplify the impact of the families, the Military Intelligence Officer tells a story that be- gan as far as ten years ago. The story is about a member of the ISF who was employed in Bekaa and murdered a family member during a protest. This member of the ISF was directly sent to the Lebanese Embassy in France to protect him from the vengeance of the family. Even there, he wasn’t safe and they located him and were planning on killing him. The French were already trying to find them before they get to the officer. That’s when he was recalled to Lebanon, sent to Tripoli while still working with ISF and changed

his name. After a while, the family once again discovered where he was, in some way ordered their only member of the family working in the ISF to be transferred to Tripoli. When this was ac- complished, this member went into the officer’s office and shot him. He then surrendered him- self to the police claiming that he had no other choice, that this was part of the responsibilities of being a member of the clan.

This business entails the darkest of all worlds: running away from the justice system, trying to make a living, trying to survive, fighting the army, killing, stealing, etc… It’s all in the name of survival. Who is the victim here? Who’s to blame? Who are the stakeholders? What are the alternative courses of action? What should the Lebanese Government do? Is it all in the hands of the Lebanese Government? Or is it all some kind of big scheme? First of all, Lebanon is an important producer of Hashish. It’s internationally renowned for its excellent A-Class Hash known as “Red-Lebanese”. Lebanon was on the U.S. list of major drug producers but then was removed from that list for reducing the amount of drugs produced and not exporting the latter to the U.S. The Lebanese Government has launched several campaigns and attempted to stop the production by destroying crops, but their efforts were limited, so were the results. When the army interferes, deaths occur. The families there are very defensive, it’s with their pride and duty towards their families and ancestors that they fight back. They are willing to and capable of doing anything to protect their crops and they value revenge. This makes it very challenging for the army to succeed at controlling these activities and trades. Another fact is that the Bekaa Valley is one of the poorest rural areas of Lebanon and it does not receive help or any support from the government. These people do not have many options: either they travel, move to Beirut or work in the Bekaa in this industry. They cannot afford planting and harvesting other things. Once

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this business is taken away from them, they would have no more money to survive and to educate their children. The Lebanese public does receive some of the Red-Lebanese but most of it is being exported to the West.

Ethical Dilemmas

Many ethical dilemmas exist:

• Is the Lebanese Government really trying to stop these activities or only pretending?

• Are the farmers growing these plants to “survive” only?

• Is the Lebanese Government involved in this? Are they the ones who enable the trade-offs to take place?

• This business is beneficial to the Lebanese economy but is it ethical in its self?

• Wouldn’t it be unethical if the Lebanese army does successfully destroy all crops and puts an end to this business without giving enough support to this poor area to make up for the losses?

• Does the end justify the means?

This takes us to the next question: who are the stakeholders? The stakeholders are the fol- lowing: the farmers; worldwide he consumers; Lebanon (government, economy, people, army, etc…); the farmers’ families; the drug dealers. This business has been the source of support for hundreds of thousands of people from farmers to drug dealers. Nevertheless, we can’t help but wonder about the ethical aspect of this business and weigh the costs against the benefits.

What is the best solution? To answer this ques- tion, first we should study the different courses of action and their effect on the stakeholders. The Lebanese Government, with the support of its army can chose one of three alternative courses of action:

1. The Lebanese Government can take no more actions towards this, therefore keep this industry going.

2. The Lebanese Government can take ac- tion, stop this drug-trade from occurring in Lebanese territories and procure the farmers with another source of living.

3. The Lebanese Government can work hand- in-hand with these farmers by legalizing some aspects of this industry and only tolerating these aspects.

If the Lebanese Government decided to adopt the first alternative course of action, the Lebanese might be included again on the list of the U.S. of those top countries who are producers of drugs. Nevertheless, Lebanon would be the perfect example of hypocrisy and unethical be- havior whereas they permit drug plantation but consider it illegal, they are harming the society, they are careless about the effect drugs have on all consumers and they are not interfering in a business where crimes and thefts occur. There- fore, the Lebanese Government would be failing in almost every task they should be providing that has as an end result security for all citizens.

If the Lebanese Government decided to shut this industry completely they might face a small yet very serious and dangerous war with the families involved and living out of this busi- ness. However, to be able to take this decision without facing severe damage, one reasonable solution would be to procure the farmers with alternative seeds: potatoes, tomatoes and many others. The Government would then be doing the “right thing” while trying to minimize the negative consequences on the stakeholders. The most remarkable effect would be the effect this decision will have on the Lebanese economy. Lebanon does make millions of dollars out of this trade therefore letting go of this industry would cause them millions of dollars yearly.

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Isn’t there a solution that would benefit all parties? The third decision might be it. The third course of action requires Lebanon to legalize some drugs, the ones that do not have nega- tive effect on consumers. Therefore, they would still benefit monetarily from this industry, while making the life of the farmers much easier, and maybe give the chance to this poor rural area to become an industrialized, advanced, controlled are that offers security and a moderate level of living to its citizens. There are drugs, such as hemp, that do not have negative effects on the consumer unless, of course, used excessively. This is the most realistic option and viable alter- native is one that has been adopted by almost all industrialized countries in the world which is legalizing or tolerating hemp. Hemp can be used for other purposes than direct consump- tion as well.

DEFINITION OF PHARMACEUTICAL SALES

With the expansion of the drug market all around the world and the growth of drug companies, health market has become saturated with com- peting medicinal drugs. Drug makers started challenging in terms of product efficacy and price. Thus, the emergence of drug marketing that made its way through pharmaceutical sales. Moreover, the pharmaceutical industry is one of the fastest growing industries in the world. It simply involves a pharmaceutical sales person professionally selling an advanced product to a physician (Hansen, 2008). A pharmaceutical sales person is the significant element in the drug sales field. This person makes sure that the people in the healthcare profession are always well informed and have the needed information. This field also offers many different aids and it

comes with advantages such as providing the sales person with a company car. Working in the pharmaceutical sales field is sometimes con- sidered a prestigious job.

PHARMACEUTICAL SALES IN LEBANON

In Lebanon pharmaceuticals have constituted a higher share of an individual’s total health expenditure. With the drug budget for the Ministry of health increasing, the rise of num- ber of pharmacies, registered pharmacists, and doctors the pharmaceutical market is experi- encing inflation in its expenditures. The aim behind pharmaceutical sales is to disseminate information and promote a drug product to the doctors through medical representatives. In Lebanon, these companies are faced with two facts characterizing the patients. Firstly, the Lebanese consumers are self-reliant to relieve themselves from minor illnesses, whereas, sec- ondly, they are also reluctant to visit doctor in case of minor health problems and habitually ask for pharmacist guidance instead. This is frequent due to the fact that most of the drugs are allotted without medical prescription and identified as OTC. We can eliminate from the OTC lists tran- quilizers that cause sleeping effects. Moreover, marketing efforts for local manufacturers is amplified since they face the imported drugs market which constitutes the bulk of Lebanese pharmaceutical expenditures. Between the two competing markets, the local and imported, the former tend to be perceived as “bad quality” by Lebanese consumers.

The main distinguishing factor underlined in drug marketing is price. In addition, it is within the normal practices of pharmaceutical mar- keting to offer gifts in order to encourage the

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prescription of a certain drug to similar local or imported versions. Pharmaceutical companies will establish their marketing strategy to address doctors with greater influence and largest circle of patients. In countries where supervision on drug dispenses and prescription is poor, doc- tors take advantage byfavoringthe prescription of the drug that comes with the best sale offer even if at the expense of the patient’s health. In this case, the gifts start to trespass the code of ethics while doctors bend their profession’s ethics to achieve self-benefit. As such, Lebanon does not have a modern drug regulatory au- thority structure neither a clear vision to form the framework for pharmaceutical legislation. In such an environment, doctors could be the profiteers.

Multi-national companies in Lebanon have signed on to a code of practices and profession’s ethics. It describes for example the value of a gift, its labeling and some restrictions. However, these companies are their own self guardians to make sure their work goes by the code. On the other hand, local companies undergo no regulation and their practices can firstly threaten the legitimacy of this profession while impos- ing a threat society’s welfare in a vulnerable environment.

Illegal Drugs in Lebanese

Ladinin is a drug which helps in the treatment of urinary tract infections (refer to Appendix 2. for basic information). Similar to other drugs, it has general side effects on the digestive system out of which we can list: vomiting, diarrhea, abdomi- nal pain, increase in liver transamineses... On the urinary system which includes crystalluria, dys- uria, albuminuria, polyuria, glomerulonephritis, hematuria, transient rise of serum creatinine not to mention the allergic sides effects.

B.ph is a pharmaceutical company which imports a variety of drugs out of which we name Ladinin. Like other companies it follows a strong marketing strategy to promote the imported products to the Lebanese doctors. A pharma sale of B.ph (Z.A.CH) met with one of the doctors in a well known hospital in order to promote Ladinin. At first, the doctor was reluctant to accept the drug at his clinic and offer it to his patients, since he already had a similar drug with the same treatment effects. The pharma sale had to convince the doctor in prescribing the drug, so he started applying his marketing job by tempting the doctor in different means. The first offer included a mobile device, but it was faced by a rejection. Yet it didn’t last much, as the pharma sale went on by mentioning the fully paid trip that the pharmaceutical company was gifting to a country of the doctor’s choice. The trip cost can be up to $3000 to be spent in any place. In the doctor’s mind, between two medicines which will eventually treat the same problem, prescribing the one that will give in return higher benefits seemed more tempting. Therefore, he agreed by taking the drug packs. The result, was prescribing it to patients without warning them of the side effects and even to those that do not have problems related to the drug’s domain of treatment.

The doctor is aware that this drug consumed in small dosage will not necessarily induce a malfunctioning of the urinary system; however, a daily intake will make the body dependent on it and therefore makes the drug ineffective in case where patients really suffered from the problem in the future. An incident was once re- ported where a patient with liver problems was prescribed this drug. Just to get rid of the drug packets, the doctor was ignoring the actual side effect with any patient, nevertheless, the prob- lem exploded when the patient’s level of liver

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transamineses was elevated and consequently causing her liver damage. The patient found herself seeking treatment for her liver. After series of consultations and diagnoses the root cause of the problem was identified as Ladinin. The patient’s family went back to the doctor to face him with the problem. After facts started to materialize, they resorted to legal actions by suing the doctor. Unfortunately, the doctor had his connections in the Ministry of Health and after several attempts with the law; the doc- tor was released from the case free of charges. Today the doctor is still practicing medicine in his clinic, at the same hospital!!

ACTUAL RESOLUTION

Dr Nenad case faced large media coverage. It is an example of corruption in the Serbian pharma- ceutical market but also a mean for the Serbian authorities to make an example for sentencing such unethical behavior. The doctor was facing legal charges for receiving more than 500,000 Euros bribery. suicide leaving a note to his wife that he couldn’t take it anymore has stopped the court ruling in his case. The public prosecution went on, on one hand, to indict any other parties that might be also involved, and on the other hand, to indict the drug company for alleging improper payments to the doctor facing charges. The trial was also aiming at identifying some state officials who could be facilitating this operation. The indictment against Dr Nenad states that he and coworkers made an arrangement with an unnamed drug firm sales staff to develop “new therapeutic applications” by the usage of their companies’ drugs, as a way of further improving sales of the products. Months prior to his death, Dr Nenad was described in the Serbian media as a children poisoner due to suggestions in the media that he had overprescribed.

As for the Lebanon case, the resolution was hardly one. The patient was unable through law to obtain justice because the doctor’s connec- tions managed to bail him out. In addition, the problem was aggravated from being a urinary problem to a liver one. The only solution left to the patient was to recur to another reputable doctor. No clear actual resolution is, in general, presented in the hands of the ill-treated party in the pharmaceutical domain and no clear le- gal regulations are stated on performing drug marketing. The problem does not only confine to doctors’ prescriptions where pharmaceutical companies have another open door and even more reaching: the pharmacies. Pharmacists in Lebanon are allowed to diagnose and recom- mend drugs without physicians’ instructions as follows:

PROPOSED RESOLUTION

Marketing practices that are unethical, these days, have developed into an important share of the pharmaceutical field as demonstrated above both in Pakistan and in Lebanon. Immoral drug actions are found in many countries but mostly concentrated in the developing countries.

On the other hand, physicians have become avaricious, and thus are susceptible to the un- ethical drug practices in the Pharmaceutical field. Almost all of the accomplishments of physicians are backed up by the Pharmaceutical Industry; thus, this field tends to use the opportunity to follow its objectives that sometimes may not be the same as the purpose and goal of the conferences. The proposed resolution can be summarized in two words: surveillance and awareness.

A key word mentioned above is in developing countries. In these countries, monitoring medical and clinical practices is poor. We can talk about it

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in two stages. At an earlier one, we speak about the laboratory testing, experimentation of drug both on humans and animals, and registration of patent duration in diverse countries. And at later stages, we can note the monitoring of doc- tor’s ethical practices in prescribing the drugs as treatment to patients. The lack of legal pursuit and sentencing is giving doctors enough space and freedom to manipulate people’s health at their own benefits. Measures should be taken and imposed by the Ministry of Health to closely assess cases where unethical medical practices are raised and take corresponding actions.

Pharmaceutical sales companies are also addressing pharmacies. In a fertile environment such as Lebanon a pharmacist is allowed to prescribe a drug to a patient without the need of a doctor’s prescription, therefore, opening another door for unethical sales in the pharma- ceutical industry. For this case, no serious drug must be given to any patient, whatever is the condition, unless he/she had a signed prescription from a doctor.

Dwelling on the idea of surveillance, it spreads to reach controlling pharmaceutical sales companies as well and restraining them from being the triggers to the doctors. The unethical practice starts exceeding by those companies by offering gifts that exceed a cer- tain budget that should be clearly set by the Ministry of Health. Broadcasting this limit will spread awareness and therefore the ability to track and legally pursue. From awareness, we can set off to speak about the public awareness. The unethical drug prescription should have enough media coverage to relay the facts and highlight the names of companies and doctors abusing their practices and therefore avoid patients from falling in their trap. The drug side effect & precaution sheet should be consulted by patients before drug consumption.

The focus of the study was to pinpoint the strength and tendencies of unethical drug promotion practices worldwide and in Lebanon specifically. Unethical marketing practices are now an essential share of drug elevation.

FUTURE TRENDS

Several countries in Europe, in addition to several states in the USA have moved aggressively to legalize the trade and use of several recreational drugs. The trend is set. The pattern is slow but heavy. Based on utility, Lebanon is an active theater of illegal drug activities for the monetary value they offer. The ethical dilemma is that Lebanese law prohibits drug plantation, yet government is aware and is implicitly encour- aging these activities; thus the contradiction and the corruption. On a pharmaceutical and economical level, drugs have a positive benefit but on a recreational and abusive level, drugs can be very harmful and sometimes deadly. They are not dangerous because they are against the law; they are against the law because they are dangerous. Lebanon should legalize some drugs, the ones that do not have negative effect on consumers. Thus, drug plantation farmers are legalized, and perhaps poor rural areas are offered a chance for economic security and a moderate level of lifestyle.

While medicinal drugs were originally meant to serve human welfare, their actual use can be most detrimental to fulfilling its purpose. For even such a humane purpose, taking away ethics from it will result in harm and is therefore con- sidered to be unethical. Drug promotion sturdily impacts prescribing behavior, but doctors under- rate this impact. As a pharmaceutical company, wanting to sell its drugs, it’s obvious that they are doing their best. Large expenses are being

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spent in order to tempt doctors and pharmacists. Certainly, large revenues are obtained in return. So here come some questions: how are these companies recovering these amounts? Who is facilitating it? Who is paying for it? The answer is in Pharmaceutical Companies arranging well equipped plans, entangling doctors, and having the patients to pay for the price of boosting up their drug sales.

CONCLUSION

Based on utility, Lebanon is an active theater of illegal drug activities for the monetary value they offer. The ethical dilemma is that Lebanese law prohibits drug plantation, yet government is aware and is implicitly encouraging these activi- ties; thus the contradiction and the corruption. On a pharmaceutical and economical level, drugs have a positive benefit but on a recreational and abusive level, drugs can be very harmful and sometimes deadly. They are not danger- ous because they are against the law; they are against the law because they are dangerous. Lebanon should legalize some drugs, the ones that do not have negative effect on consumers.

• Learn to say no! Some situations where the safety of a fellowship human becomes at stake require rejection. A physician ought to abide by the medicine pledge and say no when endangerment becomes a possibility as much as a sales representative ought to say no when encountered with doctors ask- ing for gifts or other enticements, even if non-compliance menaces representatives’ continuation in their current jobs.

• Increase self-awareness! Patients have to learn about these cases and face the fact that not all what they consume can be trusted.

• Question the source... Has this drug been banned in any other country? Has any health organization broadcasted this drug risk?

• Question the suitability of the drug with one’s condition... Thoroughly reading the drug information to point out any repercus- sions that could eventually lead to deterio- rating its state will lessen the probability of a blind drug intake.

• Taking Responsibility! Finally, the health organization, mainly in developing coun- tries, will realize the importance of limit- ing corruption in such an important sector and with time gain lessons on how to re- strict the unethical application of medical professions.

REFERENCES

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Albany, J. R. (2001). History of the drug traffic in Lebanon and Syria. Academic Press.

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Carlat, D. S. (2010). How drug reps increase drug sales by influencing physicians. Academic Press.

Eurlich, R. S. (2009). List of countries selling drugs. Executive.

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Groom, B. S. (2012, July 2). One in 30 employees test positive for illegal drugs. Financial Times, 4

Hack, C. S. (1998, October 11). Middle East Lebanon’s growing drug worries. BBC News Online Network.

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Lutz, M. S. (2006). Lebanon: Security forces destroy ‘one third’ of hashish plantations. Los Angeles Times World.

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Norris, P. S. (2005). Drug promotion - What we know, what we have yet to learn. Academic Press.

Prothero, M. S. (2009, July 1). Lebanon’s drug barons vs. the law: A battle for survival. The National.

Rae, P. S. (1999). The history of drug develop- ment. Academic Press.

Rahim, A. R. (2012). Ethical and no-ethical phar- maceutical marketing. Research Scholar, 3(11).

Reefer, M. S. (2012). Drugs policy. The Economist, 404(8797), 73-74.

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Vasovic, A. S., & Hirschler, B. S. (2008). Big pharma’s shame: Emerging markets bribery - Foreign case - By Lebanese case: According to an employee at B.ph pharmaceutical company. Academic Press.

KEY TERMS AND DEFINITIONS

Cash Crop: Agricultural production of a har- vest that generates immediate and considerable price revenue in the market.

Drugs: A substance that produces physiologic effects on the human body. When used for medi- cal treatment it is legally approved. If used for recreational hallucination it usually is illegally transacted.

Medicine: Drugs, herbs, or other substances intended for healing purposes in disease, discom- fort, or epidemic.

Pharmacy: The professional field of prac- tice that accumulates the knowledge of medical drugs supervises its production and monitors its distribution.

Recreation: Activity providing rest and re- laxation after an intensive effort or an exhausting exercise.

Smuggling: Transport, sale and purchase by illegitimate routing through black markets of substances that are illegal.

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Illegal Drugs in Lebanon

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APPENDIX

Learning Objectives

L.O.1: Explain the ethical dilemmas that root from Hashish usage in Lebanon. L.O.2: Describe the advantage and disadvantages of drugs. L.O.3: Define a solution to the drugs ethical dilemma in Lebanon that would be fair to the various

stakeholders.

Summary

Explain the Ethical Dilemmas That Root from Hashish Usage in Lebanon

First ethical dilemma is based on the theory of utility: Lebanon is pursuing these illegal activities for the monetary value it offers. The second ethical dilemma is that the Lebanese law prohibits the plantation of those drugs yet the government is aware and is encouraging these activities; thus the contradiction and the corruption.

Describe the Advantages and Disadvantages of Drugs

Like any other thing, drugs have their advantages and disadvantages. On a pharmaceutical and economical level, drugs have a positive outcome but on a recreational and abusive level, drugs can be very harmful and sometimes deadly. They are not dangerous because they are against the law; they are against the law because they are dangerous.

Define a Solution to the Drugs Ethical Dilemma in Lebanon That Would Be Fair to the Various Stakeholders

Lebanon should legalize some drugs, the ones that do not have negative effect on consumers. There- fore, they would still benefit monetarily from this industry, while making the life of the farmers much easier, and maybe give the chance to this poor rural area to become an industrialized, advanced, controlled are that offers security and a moderate level of living to its citizens.

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323

About the Author

Philippe Zgheib is a senior Fulbright scholar in business ethics, entrepreneurship, and strategic management. He holds a PhD in Economics (1994) and a Civil Engineering Doctorate (1990) from Utah State University in the USA. He has served actively in academia and in business practice since 1984, both in Lebanon and in the USA. Dr. Zgheib is a widely established corporate consultant and execu- tive business moderator with private corporations, global and domestic. His current business research is specialized in the areas of business ethics, human resource management, entrepreneurship, and in business communications. His consulting expertise includes leadership styles, conflict optimization, advanced negotiations, emotional intelligence, and crisis communications. He is also a registered pro- fessional engineer and a project development leader. His public community service includes academic accreditation, promotion of cooperatives, and strategic reform. Media exposure includes BBC World, CNN, and Voice of America.

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324

Index

A Abuse 24-40, 53, 66-74, 78, 80, 152, 155, 161, 172,

200, 255, 257-258, 260-262, 269, 288 accountability 33, 127, 144, 154-155, 202 Activism 61, 116, 129 Advertising 2, 26-27, 85, 125, 177-187, 189-190,

219, 243 airlines 71-72, 77, 229-230, 233 appraisal fraud 282, 287, 291 appraisal systems 28 Arab TV 123-125 Audit 247 Author Rights 194

B banking secrecy 241-242, 244-246, 249 BAR 165, 180, 229, 233, 237 Bio Ethics 276 Black Economy 117 black market 268-269, 272, 274, 277 Blood Business 276 Branding 9, 85, 188-189 Bribery 26, 36, 39, 114-115, 196-203, 206-208, 210,

220, 301

C Cash Crop 304 Charity 115, 140, 274 Child labor 26, 36, 39, 250-263, 265-266 climate change 93, 100-104, 107, 168 code of ethics 1, 4, 8, 199-200, 284, 300 Contamination 91-94, 96-97, 167, 169-170, 172 Copyright 27, 190-191, 211-213, 217-223, 225-228 Corporate Social Responsibility (CSR) 6, 132-133,

136-138, 140-141, 254 Corruption 4, 6-7, 22, 29-30, 33, 36, 40, 83, 113-

115, 153, 156, 160, 173, 196-199, 203, 205, 208, 243, 292, 295, 301-303, 305

Creativity 28, 144, 183, 190-192, 194-195

D Deception 126-127, 133, 137, 179-180, 189, 225,

238-239, 248, 278, 289-290 decision making 1-2, 6, 9, 16, 142, 147, 185 demand 7, 10, 69-70, 102, 124, 199, 229, 232-233,

268, 270, 273-275, 277, 279 Deontology 8, 16, 19, 23, 158 developing countries 27, 56, 93, 101-104, 166, 168,

250-251, 254, 301 Discrimination 42-48, 52-53, 60-61, 63, 69, 74, 129,

142, 144, 149, 231 Diversity 6, 138, 246 Drugs 17, 67, 251-252, 265, 292-305

E Ecology 96 Embezzlement 209, 238, 240-241, 244-245, 249 environmental ethics 91-92, 98, 162-164, 166, 169 ethical dilemma 4, 9-11, 25, 72-74, 118, 124, 222,

268, 277, 282-284, 292, 295-296, 302-303, 305 exploitation 25, 70, 251, 253, 258, 271

F family business 142-143, 150, 253-254 Favoritism 31, 144, 147, 149, 209 fear 21, 24, 34, 50, 58, 122, 156, 253-254, 261, 295 financial sector 238-239, 242, 248 Fiscality 117

G globalization 22, 26, 36, 39, 199, 294 Global Warming 100, 108, 163, 167-168 Golden Rule 21-23, 219 Grease Payment 209 greenhouse gas 168, 176

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325

Index

H Harassment 6, 41-64, 85, 171, 256 Haven 21, 117 hedge fund 116 Hospitality 126, 197, 235 hotels 80, 171, 230-234 Human Capital 226

I Intellectual Property 68, 191, 194, 211, 213-214,

217-221, 223-227

J Journalism 120, 129, 155, 191

L Litigation 59, 61, 241 Loyalty 25-27, 34, 51, 114, 144, 147, 153, 160, 231

M Manipulation 29, 113, 177-178, 185-186, 188 Market Structure 76 media bias 118-122, 125-127, 130 Medicine 8, 67, 123, 197, 200, 294, 301, 304 Misconduct 4, 6, 88, 152, 155, 160-161 Mitigation 100-103, 105, 107-108 Money Laundering 241-242, 246-247, 249 monopolies 25, 66-75, 77-78 monopolistic power 67, 71, 74, 77

N Nepotism 31, 142-147, 149-151 network security issues 82-83 non-compliance 110 norms 6, 31, 42, 61, 146, 191, 199, 231, 280-281,

284

O Oligopoly 68, 74, 76 Organ Donation 272, 276 organizational behavior 146, 151, 154 organizational values 152, 155, 161 Organ Selling 268-270, 272, 274-277

P Patent 211, 213, 220, 226-227, 294, 302 Perception 1-2, 6, 9, 11, 13, 15, 27, 29, 45, 47, 50,

64, 103, 129, 134, 138, 231, 283-284 persuasion 178, 184, 186 Piracy 190-191, 194-195, 211, 213-216, 218-225,

228 Plagiarism 190-195, 222 policy matrix 100, 105-106 Pollution 91-99, 101, 134, 163, 165-173, 183 ponzi schemes 238, 242, 244-245 Poverty 102, 250-253, 257-261, 263-265, 272-275 private sector 71-72, 135, 138, 158, 197, 206 Privatization 67, 71, 73, 75-76, 78 productivity 58-59, 73, 79, 84-85, 89, 132, 246 profitability analysis 229, 234, 236 public awareness 163, 302 Public Concern 140 Public Finance 117 Public Opinion 95, 119-120, 127, 129

Q quarries 173

R recreational drugs 294-296, 302 reservations 229-230, 233 restaurants 80, 113, 230, 232, 259

S safety 69, 86, 142, 162, 169, 212, 255-256, 260-261,

279, 294 Scandal 25-26, 170-171, 200, 209, 240, 243-244,

281 Secrecy 86, 241-242, 244-247, 249 security attack 81, 89 Segmentation 235 Sexuality 61 small business 144 Smuggling 304 social media 79, 84-86, 89, 120, 182, 185 social networking 82, 84-85 stakeholders 2, 8, 22, 32, 136-137, 211, 214, 221,

224, 228, 238, 240, 242, 248, 297-298, 305 strategic CSR 136-137

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326

Index

T Tax 81, 95, 111-117, 137, 172, 200-201, 204-205,

238, 248 Toxic Waste 32, 96, 162-163, 165-166, 170-171,

173-174 Trademark 145, 191, 211, 213, 226-227 trafficking 270-271, 273, 295, 297 Transplant Tourism 270, 276

W waiting list 272-273, 275 Whistle Blowing 152-158, 160-161, 222 worker rights 252

X Xenografting 275-276

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Cover Image
Title Page
Copyright Page
Book Series
Table of Contents
Foreword
Preface
Acknowledgment
Introduction
Section 1: Macro Ethics of Social Welfare

Chapter 1: Ethics Perception
Chapter 2: Utility, Duty, Morality, and Justice
Chapter 3: Abuse of Power
Chapter 4: Sexual Harassment Laws and Their Impact on the Work Environment
Chapter 5: Monopoly Abuse
Chapter 6: The Ethics of Social Media and Network Security
Chapter 7: Environmental Pollution
Chapter 8: Climate Change
Chapter 9: Tax Evasion
Chapter 10: Media Bias

Section 2: Corporate Business Ethics

Chapter 11: Corporate Social Responsibility
Chapter 12: Nepotism in a Family Business
Chapter 13: Whistle Blowing
Chapter 14: Toxic Waste Disposal
Chapter 15: Advertising Deceit
Chapter 16: Plagiarism
Chapter 17: Bribery and Corruption
Chapter 18: Piracy of Intellectual Property Rights and Copyright Infringement
Chapter 19: Ethical Yielding
Chapter 20: Financial Fraud
Chapter 21: Child Labor

Section 3: Country Applications and Case Studies

Chapter 22: Organ Selling
Chapter 23: Real Estate Valuation Fraud
Chapter 24: Illegal Drugs in Lebanon

Compilation of References
About the Author
Index