Business Ethics and Sustainability Culture, values and relativism

Associate Professor Michael Segon

Learning Objectives

The objectives of this topic are:

Morality

Buchholz (1989) states that morality refers to judgements of Right and wrong, good and bad.

Three characteristics are associated with such judgements.

  • 1. whether the judgements are universal
  • 2. Whether the importance overrides other considerations
  • 3. Whether moral praise and blame can be accorded to morally right and wrong actions

Cross Cultural Studies

  • Research to date suggests strongly that different national cultures have different perspectives regarding ethical values and norms.
  • It is also apparent that national culture plays a central role in shaping moral values and standards of ethical behaviour (Becker and Fritzsche, 1987; Hofstede, 1980; Langlois and Schlegelmilch, 1990; Vitell et al., 1993).
  • Strong cross-cultural differences make it difficult to develop universal moral values, reasoning, and behaviours that will be meaningful and adhered to across national boundaries.

Cross Cultural Challenge

  • It is likely, therefore, that, whereas some general ethical principles might be shared across cultures, there will always be some national-cultural idiosyncrasies on particular issues.
  • Beyond the assertion of basic moral values, then, it is important to provide some mechanism to determine the appropriate actions in a given international business situation, particularly in those cases in which competing values and practices may exist.

Understanding Culture: Layers of Culture

  • Schien (2001) provides a useful description of the interconnectedness of culture:

1. Explicit culture or Artifact: the observable reality of language, food, buildings, houses, monuments, shrines, agriculture fashion and art

2. The middle layers:

norms are consistent of expectations of how people should behave in different situations can be at a formal level- rules and laws or informal

values: values are the defined right and wrong.

3. The core Assumption and Implicit beliefs: often informed by spiritual philosophical or spiritual beliefs about existence

  • Culture is relatively stable when values and norms are consistent

However a potential disconnect can exist when norms conflict with values and core!

Visible Reality/Artifacts & Patterns of Behaviour

Norms and Values

Basic Assumptions /Implicit Beliefs

A Cultural Model:

Trompenaars and Wollliams, 2003, Schein, 2001

The Global Ethical Challenge

  • Organisations are increasingly transnational in focus operating in multiple international locations with varying degrees of autonomy.
  • Clearly this presents significant challenges for an organisation due to the differing interpretations of ethics and morality in addition to business practices in countries that may or may not be consistent with local laws or the legal system in the organisation’s home country.
  • This is the challenge of ethical or cultural relativism.

RMIT University©*

*

Different Ethics

Sanyal and Guvenli (2009) acknowledge that national cultures may influence behaviour within organisations that In turn influences the ethics of business executives within that culture.

Sims (2006, p.101) suggests that “attitudes toward business ethics may vary so greatly even within one culture that trying to come to a consensus across cultures can become nearly impossible”.

Donaldson and Dunfee (1999 p. 47) identify that “the importance of cultural differences to business are highlighted by Kluckhorn, Hofstede, Hamden-Turner and Trompenaars, yet the ethical implications remain largely unexplored”.

Ethics- Is it Cultural?

Do different cultures have different ethical standards are are they just different practices?

Can practices that are unacceptable in one country be part of the culture of another?

Common Values and Business Practices

Ferrell, Fraedrich and Ferrell (2015) and Donaldson (1996) discuss the concept of common or shared value sets, sometimes referred to as hypernorms or universal values.

They relate to those values that seem to be consistent across national boundaries and are usually derived from the major religions of Christianity, Judaism and Islam, which are all Abrahamic religions, and those sometimes referred to as Eastern religions or spiritual beliefs of Hinduism, Buddhism and Confucianism.

How Different Are We?

  • Buddhism: “Hurt not others in ways that you yourself would find hurtful.”
  • Christianity: “Whatsoever you wish that men would do to you, do so to them, for this is the law and the prophets”
  • Confucianism: Tsze-Kung asked, saying,”is there one word which may serve as a rule of practice for all one’s life? The Master said, “Is not reciprocity such a word? What you do not want done to yourself, do not do to others”
  • Hinduism” This is the sum of duty: Do naught to others which would cause pain if done to you”
  • Judaism: What is hateful to you do not to your fellow man. This is the entire law, the rest is commentary”
  • Islam: “No one of you is a believer until he desires for his brother that which he desires for himself”

Different Ethics

  • Ferrell, Fraedrich and Ferrell (2015) identify a second category of shared values, which they refer to as country cultural values that are specific to groups, sects, regions or countries that express similar actions, intent or behaviour.
  • This may apply to countries that share common ancestry such as Australia, New Zealand, South Africa the US and Canada, which were all at one-point colonies of the United Kingdom.
  • Similarly Latin based cultures of Europe including Italy, France, Spain etc have values in common as do their former colonies of Mexico, Argentina, Chile etc.
  • However even within these groups, differences and misunderstandings occur.

A Bridge to far?

  • Hooker (2009) contends that cultures differ in their conceptions of human nature. He suggests that behavioural differences may be partially due to different norms and etiquette, but he also maintains that they differ in what they value and this is a more reasonable explanation of cultural differences.

 

  • Weltzien Hovik (2007) and Vogel (1992) suggest that cultural differences including variations in understanding of justice, right and wrong, trust and relationship building etc, often means that western management practices and concepts are not effective outside of European and Anglo-Saxon countries.

 

Relativism

  • Ethical relativism claims that differing views held by different societies can both be right.
  • This is based on assumptions that moral judgements are neither right nor wrong but simply reflect differing opinion or feeling and that judgements are culturally determined, or may change over the passing of time.
  • Velasquez, Andre, Shanks and Meyer (1992); LaFollett (1991) and Buchholz (1989) similarly describe ethical relativism as the theory that morality, and ethical principles or judgments, are relative to the norms of one’s culture and whether an action is right or wrong depends on the moral norms of the society in which it is practiced and the time in which it was practiced.

Relativism

  • According to Velasquez, Andre, Shanks and Meyer (1992) for the ethical relativist, there are no universal moral standards — standards that can be universally applied to all peoples at all times.
  • The only moral standards against which a society’s practices can be judged are its own.
  • If ethical relativism is correct, there can be no common framework for resolving moral disputes or for reaching agreement on ethical matters among members of different societies.

Cultural Relativism

Cultural relativism advances the view that no culture can be seen as superior when considering interpretations of morality, religion, law, political systems, business practice, etc.

The philosophical notion is that different cultural beliefs and perspectives are equally valid and what can be seen as truth is also relative dependent on the cultural environment.

Relativism includes:

moral relativism (ethics depend on a social construct),

situational relativism (right or wrong is based on the particular context), and

cognitive relativism (truth has no objective standard and thus is contextual).

Hinman (2007) suggests relativism is only feasible when cultures don’t have to interact with one another.

Relativism- “When in Rome”

Donaldson and Dunfee suggest that some companies, recognize these cultural differences and adopt the “when in Rome” approach. They accept these as the way business is conducted in a host country, thus engage in those practices, even if these practices are considered unethical or even illegal in their home country.

They argue that this strategy is a “mistake because it exposes the company (and its brand names) to corruption and public affairs disasters, and because it misses the opportunity to find the glue that cements moral and cooperative strategy.

It neglects the important role for hypernorms. It substitutes unmitigated relativism for good sense.” (1999 p. 46).

Problems with Relativism

  • If ethical relativism is correct, it becomes impossible to establish a common framework for resolving moral disputes or for reaching agreement on ethical matters among members of different societies.
  • Managers would be required to accept activities and practices that many would find unacceptable, immoral or illegal in one country but practiced in another because these would be only matters of opinion, not fact.
  • It would also create the paradox of an organisation possibly accepting and prohibiting behaviours purely according to geography.

Problems with Relativism

  • Velasquez, Andre, Shanks and Meyer (1992) argue that it may be the case that some moral beliefs are culturally relative whereas others are not.
  • Some practices are culturally dependent, such as dress and decency, however other practices, such as slavery, torture, or political repression, may be governed by universal moral standards and judged wrong despite the many other differences that exist among cultures.
  • Simply because some practices are relative does not mean that all practices are relative.

Problems with Relativism

  • Velasquez, Andre, Shanks and Meyer (1992) state that the the strongest argument against ethical relativism comes from those who assert that universal moral standards can exist even if some moral practices and beliefs vary among cultures.
  • In other words, we can acknowledge cultural differences in moral practices and beliefs and still hold that some of these practices and beliefs are morally wrong.

The Illogic of Relativism

  • Relativism by its very nature is a contradiction.
  • If relativism is correct then all perspectives are correct.
  • Thus the view that relativism is wrong must be true. Is this not, is contradictory?
  • Relativists argue all truth is relative. But this is an absolute position which relativist say cannot exist so the statement cannot be absolute and thus it is false.

Relativism allows people and cultures to have their own position and thus truth- but truth is relative thus it cannot be true.

Absolutism

Absolutism purports a single view of morality.

The implication of this approach is that all other cultures that do not fit or align themselves with one particular view are seen as unethical (Buchholz 1989).

This will clearly result in culture clashes and conflicts when organisations establish operations in foreign countries and try to implement, not only the same values and ethics from their home country, but the same management strategies as well.

The most common example of this is the use of global codes of conduct that establish the same policy for company employees irrespective of location.

Ethics or Business Etiquette?

  • The “when in Rome” approach to business is arguing that such practices are part of business etiquette.
  • Etiquette can be defined as convention or rules that govern behaviour.
  • Just because something is accepted etiquette does not mean that it is necessarily ethical.
  • Grace and Cohen (2005) note that ethics is more than just rules and custom as such etiquette exists in many forms, yet ethical challenges persist.

Categories of Authentic Global Norms

Donaldson and Dunfee (1999) propose a model of “norms” that help navigate the challenges of global business dealings.

  • Hyper-norms- fundamental human rights or basic prescriptions common to most religions- values acceptable to all cultures
  • Consistent Norms- culturally specific values but consistent with hyper-norms and other legitimate norms- i.e. codes of ethics
  • Moral Free space- norms that are inconsistent with hyper-norms and other legitimate norms yet are firmly held by specific cultures
  • Illegitimate norms- norms that are not only incompatible but transgress permissible limits-

Categories of Authentic Global Norms

RMIT University©*

*

Illegitimate Norms incompatible with Hypernorms

Illegitimate Norms incompatible with Hypernorms

Illegitimate Norms incompatible with Hypernorms

Illegitimate Norms incompatible with Hypernorms

Global Ethical Frameworks-

Georges Enderle has identified four types of approach, each of which is analogous to a posture taken historically by nation-states

  • Foreign Country Type : organisation conforms to local customs, assuming that what prevails as morality in the host climate is an adequate guide
  • Empire Type: this organsiation applies domestic concepts and theories without making any serious modifications. Empire-type companies export their values in a wholesale fashion—and often do so regardless of the consequences
  • Interconnection Type: this type of organisations regard the international sphere as differing significantly from the domestic sphere, and one in which the interconnectedness of companies transcends national identities. In this model, the entire notion of national interest is blurred
  • Global Type: this type of organisations views the domestic sphere as irrelevant. From this vantage point the citizens of all nations, whether they are corporate or individual citizens, must become more cosmopolitan. The nation-state is vanishing, and in turn, only global citizenry makes sense.

Organisation Types and Cultures

It is helpful to analyze Enderle’s has identified four types these basic types of corporate approaches from the standpoint two key concepts of moral free space and hyper-norms.

The Foreign Country type does not limit the moral free space of the host-country culture. If a culture accepts corruption and environmental degradation, then so be it. No rules of thumb restrain granting an automatic preference to host-country norms—whatever they are.

The Global and the Empire types succeed in avoiding the vicious relativism that characterizes the Foreign Country type, but manage to fall prey to exactly the opposite problem. Since each type acts from a fixed blueprint of right and wrong, each suffocates the host country’s moral free space and leaves no room for legitimate local norms.

The Empire type displays a version of moral imperialism Instead of imposing its home morality on a host culture, it imposes its interpretation of a global moral- ity on a host culture. Because only global citizenry makes sense, the company can be numb to the moral differences that mark a culture’s distinctiveness. The opportunity for host cultures to define their moral and economic identity is lost.

(Donaldson and Dunfee, 1999)

International Ethics Strategies.

Several Global Strategies or Principles have been developed in recent years to assist business cope with working in diverse cultures.

The two best known are:

the United Nation’s Global Compact and

the Caux Round Table’s international business ethics principles.

The UN’s Global Compact

  • The Global Compact Programme, was launched in 2000 by the then United Nation’s Secretary Mr. Kofi Annan, for business worldwide, with the fundamental principles of social responsibility and sustainable growth.
  • Its aim is to not only great wealth for business, but for societies across the global by fostering responsible practice and social development.

The UN’s Global Compact- 10 Principles

There are a series of core values including human rights, labor, environment and anti-corruption and ten universally accepted principles which companies are asked to commit to:

Human rights:

1. Business should support and respect the protection of internationally proclaimed human rights.

2. Make sure they are not complicit in human rights abuses.

Labour:

3. Business should uphold the freedom of association and the effective recognition of the right to collective bargaining.

4. The elimination of all forms of forced and compulsory labor.

5. The effective abolition of child labor.

6. Eliminate discrimination in respect to employment and occupation.

(Source: www.unglobalcompact.org)

The UN’s Global Compact- 10 Principles

Environment:

7. Business should support a precautionary approach to environmental challenges.

8. Undertake initiatives to promote greater environmental responsibility.

9. Encourage the development and diffusion of environmentally friendly technologies.

 

Anti-corruption:

 

  • 10. Businesses should work against all forms of corruption, including extortion and bribery

(Source: www.unglobalcompact.org)

The Caux Round Table

  • The CRT Principles were developed in the late 1980’s and early 1990’s by company executives from from Europe, Japan, and the United States.
  • The CRT Principles for Business can be described as a worldwide vision for ethical and responsible corporate behaviour, and as a set of world standard against which behavior can be measured.
  • The principles were developed using two ethical ideals:
  • “Kyosei”: a Japanese concept of living and working together for the common good enabling cooperation and mutual prosperity to coexist with healthy and fair competition.
  • “Human dignity” a western referring to the sacredness or value of each person as an end, not simply as a means to the fulfillment of others’ purposes or even majority prescription.

The 7 Caux Round Table Principles

  • Principle 1. The Responsibilities Of Businesses: Beyond Shareholders toward Stakeholders
  • Principle 2. The Economic and Social Impact of Business: Toward Innovation, Justice and World Community
  • Principle 3. Business Behavior: Beyond the Letter of Law Toward a Spirit of Trust
  • Principle 4. Respect for Rules
  • Principle 5. Support for Multilateral Trade
  • Principle 6. Respect for the Environment
  • Principle 7. Avoidance of Illicit Operations

Dealing With Global Ethics

The most common approach used by organisations to deal with differing cultures and ethics, is to establish a consistent framework within the organisation that it applied wherever their organisation operates.

Global Codes of Conduct or Ethics is the extension of ethics framework) with clear policies related to acceptable behaviours and non-acceptable behaviours.

The issue is the extent to which such frameworks are compliance or aspirational in nature.

Global Ethical Frameworks- Enthocentric

Sanyal and Guvenli (2009) identify an ethnocentric approach as companies using their existing organisational values and practices, primarily based on their home country’s practices.

  • It has the clear advantage of not increasing costs through the creation of new policies and procedures.
  • Existing employees already be inculcated and able to apply the ethics framework in the new location.

 

  • The disadvantage is that the existing ethics framework, designed on home country’s values may not translate effectively to the host country causing cultural conflicts.
  • This strategy would be an example of ethical absolutism.

Global Ethical Frameworks- Polycentric

Sanyal and Guvenli (2009) identify a polycentric approach as the creation of new values and practices adapting to local practices of the host country .

  • It has the clear advantage of allowing employees to engage in business activity with confidence that they are consistent with accepted practice.
  • The disadvantage is that these practices may be inconsistent with the organisation’s values and policies in other countries.
  • It may also be a high risk strategy when such practices are deemed illegal in the home country. i.e. foreign corrupt practices legislation
  • This is an example of ethical relativism and may create difficulties for organisations when they are ask to justify their actions

Global Ethics- A considered “mean”

These two set of guidelines and principles illustrate an important point in the development of an organisational framework for international business dealings. Neither the absolutist nor relativist perspective provides the answers to the challenges of differing cultures.

As Donaldson (1996) suggests, the answer is likely to be somewhere in between the two.

Organisations need to develop ethical frameworks that will allow a degree of flexibility and respect local traditions, yet at the same time are consistent with a principled approach and ensure that laws are not broken and individuals and companies are not put at risk.

Cross-Cultural Conflicts

DeGeorge (1993) argues that each situation requires judgment and moral imagination.

He identifies three types of ethical conflicts:

  • 1) pressures on individuals to violate personal norms,
  • 2) inconsistent cultural norms, and
  • 3) host versus home country interests and values.

Cross-Cultural Conflicts 2

  • Velasquez (1995) argues that the utilitarian framework used by DeGeorge must be placed in the context of microeconomic theory to make it more relevant. Further, Velasquez concludes that DeGeorge’s approach would be further strengthened by including principles of justice, particularly with respect to the activities of powerful MNCs operating in less developed countries.
  • Key Variables Influencing the Selection of Strategies Based on the literature review, we propose that three situational variables are key in determining the appropriate strategy for conflict resolution:
  • moral significance,
  • power,
  • and urgency.

Cross-Cultural Conflicts 3

  • There are several ethical criteria implicit in Velasquez ‘s model.
  • 1. the higher the moral significance of the values at stake the more one is justified in pressing for conformity with one’s views, especially when it appears that the issues have less significance to the other party to the conflict.
  • 2. the less the moral significance, the more one is justified in accommodating or compromising, especially when the issues appear to be highly significant for the other party to the conflict.
  • 3. as far as possible, the position of the other party, especially when it represents fundamental values of the culture, must be treated respectfully. This requires listening, empathy, and attempting to understand the value priorities of the other party.
  • 4. as far as possible, the freedom and autonomy of those who differ should be respected.