Ethics In Business

UNIT 3

WHISTLE-BLOWING AND BUSINESS ETHICS

BUSINESS, CULTURE AND POLITICS

Whistle-Blowing

WHISTLE- BLOWING

Release of information by a member or former employee of an organisation that is evidence of illegal and or immoral conduct in the organisation or conduct in the organisation.

Whistle-Blowing can only be done by an member in the organisation not a witness of a crime or a reporter.

DEFINING WHISTLE- BLOWING

1) Whistle-Blowing is something that can be done only by a member or former member of an

organisation.

2) It must be an Information that is not available for public.

3) It should be an evidence of some significant kind of misconduct on the part of an organisation.

4) Information must be outside normal channel of communication.

5) Release of Information must be something that is done voluntarily as opposed to being legally

required.

6) Whistle Blowing must be undertaken as moral protest. The motive must be correct some wrong

not to seek vigilance or personal advancement.

TYPES OF WHISTLE-BLOWING

• Internal Whistle-

• Blowing

✓ When an individual

advocates beliefs or

revelations within

the organization.

External Whistle-

Blowing

✓ When and

individual

advocates beliefs or

revelations outside

the organization.

CO N D I T I O NS FO R J U S T I F I E D WH I S T L E -BLOWING

Situation of sufficient moral importance:

If the situation of information is to disclosure people's live at stake (for example, side-effects of drug

or medicine if not prescribed in the cover of medicine and information is releaved to public by

whistle blower).

Situation when all facts of information are properly understood with their

significance:

–A Whistle-Blower must do much documentation and other corrections as possible because

he/she is strong obliged to people

–An Employee should not jump into conclusion without much clarification.

–If significance of information is genuine it could be justified.

All internal channels have to be utilized without a step short of Whistle-Blowing:

–Whistle-Blowing should be last not the first resort.

–Its justified when there in no morally preferable alternatives.

–Information should be revealed to those external subjects who have power to change the

situation.

●Firstly,

Defence of the Law protect whistle blowers to provide best contributions to the society.

▪Secondly,

Defence of the Law supports the right of an employee on his freedom to speech

Arguments for Whistle-Blower Protection

●Firstly, Law recognises whistle blowing as a right is open to abuse:

Employees might find an excuse to blow the whistle in order to cover up their own incompetency or inadequate performance.

▪Secondly, Legislation to protect whistle blowers could add on rights to employees and make an environment difficult for managers to run company effectively.

Arguments against Whistle-Blower Protection

1. Benefit in learning mistakes and problems in early stage itself.

2. Shows companies commitment towards good ethics and ethical corporate climate.

1. Legitimate complaints sends wrong signal to other employees to whistle blow in case of tension or strike.

2. Employee may go outside of normal communication channel which is undesirable.

BENEFITS AND DANGER OFCOMPANY WHISTLE-BLOWING POLICY

Benefits Dangers

In 2014, World stood still with a shocking revelation from a computer analyst Edward Snowden.

A computer analyst whistleblower who exposed top-secret NSA documents leading to revelations about US surveillance on phone and internet communications.

During the time where “free internet”, rights of a “netizen”, “internet security” were hot topic for debates this kind of news and revelations created huge storm to the Government and trust worthiness of citizens of the country. Government and authorities even the President himself appeared for an explanation to this incident. Even with much efforts government has retrieved its falling name and trust of its citizens. As subject of controversy Snowden is variously called as a “traitor”, “hero”, a whistleblower and even as “patriot”. For some he is a traitor who worked for Dell broke the country’s security code to retrieve classified information. For some he is a hero who is courage's enough to pull those ‘black loops’ of the government and Nations Security Intelligence.

His US passport has been cancelled and he fled to Russia for granting asylum.

Edward Snowden: The Ethics of Whistleblowing - Who Do You Think You Are? – YouTube

DILEMMA:

1.Is Edward Snowden who is an employee under Dell Computer exposed the classified information to public media against the government authorities and law a “corporate traitor”?

2.Is Edward Snowden who revealed a corporate crime that remind the public about the so called “internet security” veil is so transparent even the authority can bypass through security access of public. By this Act do he resembles a “patriot” who stood for public interest?

Government and Business Policies

WHAT IS GOVERNMENT? Government is a system of social control under which the right to make laws,

and the right to enforce them, is given to a particular group in society.

Governments come in different forms. Forms of government are distinguished

on the basis of its organizational structure and the degree of control

exercised over the society.

There are four common types/forms of government:

▪ Monarchy

▪ Dictatorship

▪ Democracy

▪ Theocracy

▪ Transitional

• In a democracy, the government is elected by the people. Everyone who is eligible to

vote has a chance to have their say over who runs the country. It is distinct from

governments controlled by a particular social class or group

• A democracy is determined either directly or through elected representatives.

Direct Democracy

• People vote directly on every issue

• Only practical in a small community

Representative Democracy

• People are represented by elected officials

• Used in large countries

• Also known as a Republic government

Democracy

Fundamental Elements of Democratic Political Systems

• Power is in the hands of a king, queen, emperor or empress.

• The ruling position can be passed on to the ruler’s heirs.

• In some traditional monarchies, the monarch has absolute power.

• But a constitutional monarchy, like the UK, also has a democratic government that limits the monarch's control.

• Most constitutional monarchies use a parliamentary system in which the king or queen may have strictly ceremonial duties. They often have an elected prime minister who is the head of government.

E.g.: Qatar, UK

Monarchy

• Governmental rulers are identical with the leaders of the dominant religion

• Governmental policies are either identical with or strongly influenced by the principals of the

majority religion.

• Government claims to rule on behalf of God or a higher power.

• E.g.: Iran, Vatican

Theocracy

• A country ruled by a single leader or party. The leader has not been elected and may use force

to keep control, having an absolute control over all citizens and every aspect of their lives.

• In a military dictatorship, the army is in control.

• Other names for a dictatorship include: Authoritarianism, Military Junta, Right, Wing,

Totalitarianism or Fascism.

• E.g.: North Korea, Myanmar (Burma)

Dictatorship

Transitional

• A transitional government is one that is in the process of changing from one form

to another.

• Countries with transitional governments are often unstable.

E.g.: Iraq, Afghanistan

Economic Systems

Economic systems (i.e., production, distribution and

consumption of goods and services) are closely

connected to the form of governments.

There are three main forms of economic systems:

• Capitalism

• Socialism

• Communism

Capitalism

• An economic system in which individuals and

corporations are free to invest in and own all aspect

of a business.

• In a capitalist country, people own their own

companies and can manage them to earn a profit.

• E.g.: the United States

Socialism

• Apolitical and economic system in which some businesses are controlled by the government rather than by individuals.

• In a socialist country, people have equal rights to various benefits (health, education), and there is an effort to limit the inequalities of wealth and power.

• Taxes are often quite high to provide for these benefits.

• People do hold private property in socialist countries.

• A country can be both socialist and democratic

E.g.: Sweden

Communism

• A political and economic system in which the government controls all business.

• Individual people cannot own property or industries and in theory, people of all social classes are treated equally.

• Communist countries have totalitarian governments.

• All communists are socialists, but not all socialists are communists.

• E.g.: China

Political Environment

• Political decisions affect all aspects of the business environment

• Political decisions reflect underlying ideologies or beliefs

• Political decisions can create opportunities or threats for organisations

• Political decisions are taken at a variety of levels:

▪ Local

▪ Regional

▪ National

▪ Global

Companies like certainty in their environment and they tend to invest where risk is

limited.

Bureaucracy

Corruption level

Freedom of the press

Tariffs

Trade control

Education Law

Anti-trust law

Employment law

Discrimination law

Data protection law

Environmental Law

Health and safety law

Competition regulation

Regulation and deregulation

Tax policy (tax rates and incentives)

Government stability and related changes

Government involvement in trade unions and agreements

Import restrictions on quality and quantity of product

Intellectual property law (Copyright, patents)

Consumer protection and e-commerce

Laws that regulate environment pollution

Main political/legal factors affecting business:

In the broad context of international business, political risk is defined as the risk or probability of occurrence of some political events that will change the prospects for the profitability of a given investment.

Macro-political risk events include sociopolitical disorder, power group transfer, and political corruption as well as government interference.

Political Risk

• Instability: The probability of encountering political risk in a host country is considered to

be directly related to the relative stability the country's political system. This instability may

have its roots in different economic, political, and social factors. Some specific causal

factors may include communal unrest, strained international relations with neighboring

countries.

• Past patterns: Past patterns of political behavior is analyzed to determine political risk

involved. However, predicting political risk on the basis of historical records has its own

drawbacks. Political situations under which risks were encountered by companies or

individuals in the past might have changed altogether.

• Opinion analysis: Political risk may also be measured qualitatively by examining the views

of people engaged in governmental decision making and people who may influence future

political events affecting business.

Measuring Political Risk

• Avoidance: Selecting only safe environments for business and rejecting regions

that are perceived to have greater than average degree of political risk.

• Premium for risk: Increasing the ROI (return on investment) or requiring shorter

period of payback.

• Adaptation: Responding to the particular political environment of the host country

and structuring the international operations accordingly (e.g., adapting to the local

methods, utilization of host country professional expertise, joint venture, etc.).

• Transfer: Sharing of risks with other individuals or companies or reducing the risks

through transfer to other agencies.

Political Risk Management

Some of the steps that an individual or a company may follow in order to establish

political strategies:

➢ Identifying the issue (e.g., protectionism, environmental standards, human rights,

workers rights, etc.)

➢ Defining the nature of the political issue

➢ Assessing the potential political action of other firms and of special interest groups

➢ Identifying important institutions and key individuals

➢ Formulation of strategies (objectives, alternatives)

➢ Determining the impact of implementation (both in home and host countries)

➢ Selection of the most appropriate strategy and implementation.

Political Strategies for conducting business

Main conclusions:

• The political environment is both complex and dynamic

• Individuals and organisations have different views as to the ‘correct’ role of

governments and institutions – and interpret these relationships in different

ways

• Government and institutional attitudes change over time, sometimes

amazingly quickly

• Decisions at the four different geo-political levels are all interlinked

• International aspects are increasingly important

EFFECTS OF CULTURE ON BUSINESS

WHAT IS CULTURE? Culture is a socially transmitted knowledge of values, beliefs, norms, and

lifeways of a particular group guiding their thoughts, generating behaviors and

interpreting experiences. Culture is defined, among others, by language, religion,

cuisine, social habits, music and arts.

Culture does not exist outside of people’s heads

Each person has his or her own version of a culture based on life experience and

the roles he or she knows (age, gender, professional, social class, ethnicity, etc)

No one person knows the entirety of a culture

No business can be culturally neutral

Culture is a composite of all the rules for all the roles that anyone plays in a

given society

Culture may have visible and invisible elements:

• Visible—easily seen

– Clothing, jewelry, charms, hairstyles

• Invisible—less observable

– Value belief system that drives visible practices

Culture and Its Effect

Once upon a time there was a great flood, and involved in this flood were two creatures, a monkey and a fish. The monkey, being agile and experienced, was lucky enough to scramble up a tree and escape the raging waters. As he looked down from his safe perch, he saw the poor fish struggling against the swift current. With the best of intentions, he reached down and lifted the fish from the water. The result was inevitable.

3-35

Power Distance

– How much people accept equality in power; high power distance reflects an acceptance of power inequality

among institutions, organizations, and individuals. Low power distance means people expect equality in power

Uncertainty Avoidance

– The degree to which members of a society feel uncomfortable with uncertainty and ambiguity and thus support

beliefs and behaviors that promise certainty and conformity

Individualism

– A value for a loosely knit social framework in which individuals are expected to take care of themselves.

Collectivism

– A preference for a tightly knit social framework in which people look out for one another and organizations

protect their members’ interests

Masculinity

– A preference for achievement, heroism, assertiveness, work centrality, and material success

Femininity

– A preference for relationships, cooperation, group decision making, and quality of life

Hofstede’s Value Dimensions

Hofstede's cultural dimensions theory is a framework for cross-cultural communication, developed by Geert Hofstede. It shows the

effects of a society's culture on the values of its members, and how these values relate to behaviour.

Impact of Language on Business

• One of the first barriers that companies face on

the path of internationalisation is differences in

natural languages.

• The language diversity has created problems for

companies in integrating their workforces and

marketing products on a truly national level.

Impact of Language on Business

• In Taiwan, the translation of the Pepsi slogan “Come alive with the Pepsi Generation“ is changed as “Pepsi will bring your ancestors back from the dead“.

Impact of Language on Business

• In China,the name Coca-Cola was first rendered as Ke-kou-ke- la.Unfortunately, the Coke company did not discover until after thousands of signs had been printed that the phrase means “bite the wax tadpole” or “female horse stuffed with wax” depending on the dialect.

• Coke then researched 40,000 Chinese characters and found a close phonetic equivalent, “ko-kou-ko-le“, which can be loosely translated as “happiness in the mouth“.

Music and Arts

• One of the easiest way to reach people is music and arts-

especially tv series.When you reach people,your job is pretty

easier for business and marketing.

• Some countries have realized the greatiest impact of tv

series,music and different arts on business.

Religion

• Religion is a strong shaper of values. Religion of a nation

has influence on the way firms are doing business like

working hours, holidays, preferences and tastes.

• For example, McDonald’s agreed not to serve beef in

India because of criticism from Hindus, the Israeli national

airline, does not fly on Saturday (it is holiday in Judaism).

Social Habits

Avoid doing the things below when making business with Japanese people;

•Do not blow your nose in a public place (including meeting rooms).

•Do not grab your host's hand in meetings.

•Never pat a Japanese man on the back or shoulder.

•Always smile, be pleasant, be willing to learn, ask a lot of questions about your customer's company (and

none about his/her private life).

Other examples:

•France: Wear an official dress.

•Saudi Arabia: During the greetings kiss three times (never ever try to kiss a women).

•Germany: Be there on time.

Japan a. Much of the Japanese culture—and the basis of working relationships—can be explained by

the principle of wa, meaning peace and harmony.

b. Japan’s cultural roots have produced a very homogeneous managerial value system, with

strong middle management, strong working relationships, a strong seniority system that

stresses rank, and an emphasis on looking after subordinates.

c. The principle of wa places emphasis on participative management, consensus problem

solving, and decision making within a patient, long-term perspective. Low emphasis is given

to open expression of conflict.

Comparing cultures:

Germany a. The reunited Germany is naturally fairly culturally diverse, because the country borders

several nations. Based on Hofstede, Germans rank high on individualism (though less

individualistic than the United States), high on uncertainty avoidance and masculinity, and have

a relatively small need for power distance. These cultural norms manifest themselves in

German’s preferences for being around familiar people and situations and, also, in their

propensity to do a detailed evaluation of business deals before committing themselves.

b. Christianity dominates German culture—96 percent are either Protestant or Catholic.

This may be why Germans prefer rule and order in their lives. Germans are assertive in

business but not aggressive; they have a very strict sense and use of time and follow

hierarchical organizational structures with power at the top. In negotiations, Germans want

detailed information before and during discussions.

Comparing cultures:

Latin America a. Latin America comprises many diverse independent nations, where mostly Spanish or

Portuguese languages prevail.

b. Christianity—predominantly Roman Catholicism—is the religion of Latin America, and

people in general are high on power distance and uncertainty avoidance.

c. People have a very fluid orientation toward time and tend to be multi-focused; planning,

negotiations, and scheduling take place in a more relaxed atmosphere.

d. Communication tends to be expressive, demonstrative, and high-context.

Comparing cultures:

South Korea

a. Koreans rank high on collectivism and pragmatism, fairly low on masculinity, moderate on

power distance, and quite high on uncertainty avoidance. In Korea, priorities are family,

respect for authority, formality, class, and rank. Koreans are aggressive and hardworking,

friendly, and hospitable.

b. Business is based on honor and trust; most contracts are oral.

Comparing cultures:

Cuisine

Preferences and tastes may be different for each individual, it also differs among different

cultures. For example, Japan people dislike sour tastes like lemon, and colors that is

reminder of sour (yellow). Because of this perception, firms using yellow packages on

their product have faced a decrease in their sales.

Kellogg's set up a branch in India and started selling Corn Flakes. What they didn't

realize was that Indians think that to start the day with something cold -- like cold milk

on their cereal -- is a shock to the system. And if they pour warm milk on Kellogg's Corn

Flakes, they instantly turn into wet paper. In business studies, when you look at a

market, you have to know something about its anthropology and its cultural rituals.

What Kellogg’s ignored was that the Indians dislike cold breakfast.

Managing Cultural Differences

• Although there are cultural differences between different companies belonging to the different nations, these differences are not necessarily a handicap. There is a need for understanding between the firms in the different cultures. The parties must learn how to cope with the cultural differences that exist. In order to manage these cultural differences, first of all we must admit that there exist cultural differences in different nations. So, if multinational firms want to be successful in different markets, they must be flexible and respond the local preferences, tastes and perceptions which are different from their home country.

CULTURES CAN CHANGE!

Culture change occurs in one of two ways

1. A new behavior pattern spreads through a group, followed by a change in the rules and standards to conform with the new behavior pattern.

2. A change in the conscious rules of the society, followed by a change in behavior patterns.

Change in behavior patterns and changes in rules do not usually occur simultaneously

• Source

• Internal Source = invention or discovery

• External Source = diffusion

• Motivation

• Internal Motivation = cultural evolution

• External Motivation = conquest or colonialism

Aspects of Culture Change

Types of Change motivation May be a new culture or return to past traditions

Internally Motivated

1. Revolution = violent

overthrow of existing

leadership

2. Millenial Movement =

secular with political

leader

2. Revitalization = religious

with religious prophet as

leader

Externally Motivated

1. Conquest = forced

massive change after war

2. Colonization = occupation

with goal of economic

exploitation

Individual Change

• Acculturation

• Assimilation

• Biculturalism

Group Change

• Evolution

• Diffusion

• Syncretism

Types of Culture Change

Cultural Evolution

• This is the sort of natural change that occurs in all societies, as people adjust their cultures to fit new environmental conditions and situations. Individuals try out new strategies and/or beliefs, and the rest of the society decides whether the new practice is working well. When a new practice is adopted by a significant segment of the society, then culture change has occurred.

Diffusion

• This occurs when a culture trait is borrowed by a society in which it did not develop. For example, Coke and Pepsi are found throughout the world in literally hundreds of societies. These products have diffused around the world.

Syncretism

• Syncretism occurs when aspects of two cultures are blended into a single culture trait. A good example of this is Mexican food as it is served in Southern California. Taco Bell and El Torito are not authentic Mexican food. They are a blending of Mexican and American ingredients cooked in Mexican styles that have been adapted to American tastes.

Acculturation (do NOT confuse with Enculturation, i.e. learning the culture you grow up in)

• This is what occurs when individuals or groups migrate to an new country or culture. They must adjust to the new cultural context in which they find themselves. Immigrants tend to acculturate at different rates depending on the part of culture they need to change, and the number of immigrants from their home culture that are living in the new society. Religion is usually one of the last aspects of culture to be changed.

Assimilation

• This is what happens when individuals acculturate to a new culture and become so fully immersed that they are indistinguishable from native members of the new society into which they have moved. Research shows that it takes three generations for immigrants to fully assimilate to a new culture. The actual immigrants themselves have little chance of assimilation. It is their grandchildren who will be fully assimilated.

Biculturalism

• Biculturalism occurs when an individual knows two cultures extremely well, and can act as a native in either culture. Bicultural individuals frequently switch back and forth from one culture to another, depending on the social context in which they find themselves.

Humor and culture in international business | Chris

Smit | TEDxLeuven – YouTube