Cultural and Business Ethics

Paul Seitz

The author
The author, who is currently studying for an MBA via Henley Management College UK distance learning programme, can be contacted at 12 Fung Fai Terrace, Flat D 16 Floor, Happy Valley, Hong Kong. seitzpa@grandalliance.com It has been said that countries exhibit very different views on the make up of business ethics. These differences are regarded as based largely in cultural diversity. For example, Japan is considered to have an entirely different set of guidelines than the United States because the cultures of these two countries come from entirely different origins. However, if business ethics are based only in culture then businesses global interactions should instigate much more conflict than currently exists. The basic cultures of Japan and the United States have very little common ground, therefore their views on business ethics would come from entirely opposite directions. Compromising a cultures moral values can be considered extremely difficult; it is much more likely that those same values would try to be imposed upon the other party. With each culture imposing its values on the other, the result would be adamant conflict. However, the rapid growth of global business paints this picture of conflict as false. Businesses can only expand quickly in global markets by being empathic to the needs, perspectives, and accepted procedures of their foreign counterparts and partners. Therefore, business ethics is not entirely based on the culture from which it is derived. It is based more on a basic human moral understanding that transcends international boundaries. Up to present, ethics have evolved through isolated pockets due to the limited scope of global communications. Todays close communication and cooperation of companies worldwide will have an evening out effect. Business ethics will eventually drive toward one general definition. What exactly constitutes that definition is yet to be determined. The certainty is that the definition will be fluid in nature and change as new principles are accepted and implemented. To know where we are headed we must understand how ethical business practices evolved. Although business ethics is a relatively new study the concept has been around

since commerce began. For instance, a blacksmith earned his reputation by treating his employees well and his customers fairly. As his reputation grew so did the size of his business. While this is a simplistic example it is meant to show that the concept of fair business practices has existed and contributed to the success of enterprises long before business ethics became an established study. Prior to todays multiple innovations in worldwide communications, business morals in Volume 8 Number 1 2001 21 each separate geographical area evolved on their own. Without much influence from the outside world, ethical behaviour was influenced by what was important to the society. What was significant to the society created expectations of fair business practices that have carried through the years. What do societies consider important? For the purposes of comparison between cultures, consider that business ethics are focused on three main areas, Employees, Environment and Consumers. These three items are common to any business regardless of its originating country or cultural background. Therefore, businesses grouped by culture and hence geographical area can be compared and evaluated on how each item is prioritised. These differences can then be said to stem from each regions development in business ethics. We will consider three geographic areas that currently drive the global market. These areas are Japan, the United States, and the European Community. Of course there are other regions that have impact on world trade, but these three areas represent very different backgrounds and therefore provide a good basis for comparison of culture and ethics. The following is a generalisation of basic practices in each region. Japan As a society, Japan was isolated until 1854. The society and culture evolved primarily on its own. In this isolated area with limited land space, the need to cooperate and live harmoniously with others was paramount. This gave rise to the communal concepts that typify the Japanese culture and have shaped a large part of acceptable business practices. This communal spirit can also be seen in the value placed on teamwork. The achievements of the team are exemplified and individual achievements down played. The emphasis is placed on working together rather than gaining specific awards. This leads to the idea of a moral commitment to employees. Only under the most extreme

circumstances are human resources trimmed. Instead workers are retained as long as possible, promotions are attained through tenure and questions of employee burnout are solved by regular job rotations. Peoples long term stable employment can be considered the first priority of Japanese companies. Domestic environmental concerns have always been in the forefront of business plans. In a country with limited resources the need to conserve those resources, and hence the environment, is implicitly understood. Industry has taken the lead and understands environmental and safety levels as a competitive advantage (Hagman, 1993). As a very basic example of the influence that limited resources has in Japan, if a business builds a sprawling plant which uses land wastefully, where can employees find adequate housing? The balance between the 22 Cross Cultural Management use and conservation of resources has constantly been under scrutiny out of sheer necessity. The Japanese restriction of imports creates a market dominated by domestic companies where profit margins, once established, can be relied upon (Krugman, 1984). This enables companies to focus more on penetrating foreign markets than competing domestically (Andersson, 1993). The result for the consumer is the perpetuation of high prices and a high overall cost of living. Thus, the Japanese companies could be said to place higher priority on their employees and the environment than meeting the consumers interests in relative low prices. United States The United States current economy is very strong, yet companies still seek to lower overhead costs via employee cutbacks. The commitment between a company and employees and vice versa is not very strong. The concept of individualism is much more powerful. Generally speaking, it is considered that a persons fate does not determine success, but a persons drive towards success determines his or her own fate. Employees while highly regarded are surpassed by environmental and consumer concerns. The environmental concerns in the United States are a result of increasing public awareness, and that awareness led to governmental action. For industries accustomed to wide open spaces where resources seemed unlimited, the transition to being more environmentally conscious has been slow. In recent years, however, the pace

has quickened when companies realised that being environmentally friendly would open up new untapped markets. This brings up an important understanding. As stated before, the civilization of the United States is fiercely independent and individualistic. Those individuals comprise the domestic market. While industry may grudgingly accept governmental controls, the demands of the market induce rapid changes in industry standards and procedures. This leads to the first priority of the United States industries, consumers. The main focus of business ethics in the United States is on protection of the consumer. Companies are held to four essential duties. These include the duty to comply or distribute a product that lives up to its claims, to disclose or spell out exactly what those claims are, to not misrepresent or mislead consumers, and to inform the consumers when a fault in the product has been detected. Many ethical case studies examine what to do when faced with a faulty product report. An example of this is the exploding pop bottle case of 1980 (Swartz, 1980). At the time Pepsi Cola company and a majority of carbonated beverage producers distributed the 1.5 litre and 750 ml size products in glass bottles. A three year old boy, Matthew McNair, accidentally tipped over a typical unopened bottle resulting in an explosion of glass that rendered the boy blind in one eye. Public outcry led to government tests on the bottles. These tests concluded that the incident was Volume 8 Number 1 2001 23 not isolated in nature and that glass bottles had the potential to break when tipped over. From this conclusion and at great cost, the cola industry immediately switched bottle materials, first to plastic-coated glass, and ultimately to completely plastic bottles. Industrys quick action helped to maintain consumer relations. Therefore, relative emphasis is placed first on consumers and next on the environment and lastly on employees. European Community The priorities of the European businesses are a little more difficult to set down clearly. A multitude of cultures have established themselves side by side on the continent, each seeking to fulfill its own agenda; an agenda that is sometimes to the detriment of neighbouring societies. However, work toward the creation of a single European market has made significant progress. Examining that union in terms of employment sets up a contradiction.

Governments consider it their duty to protect employees and working conditions. Companies are bound by stiff regulations that prohibitively raise the costs of employing new personnel and make it extremely difficult to adjust a companys workforce (Forsyth, 1994). As a result, companies become reluctant to bring on new hires or the companies move out of Europe seeking favourable labour costs. While governments seek to improve employee welfare, the result is that both situations contribute to the dramatic levels of unemployment seen today. Given the state of conditions where the government sets employee welfare and companies are reluctant to expand operations; it can be noted that business gives employees a relatively low priority. Environmental concerns are given much attention in Europe. Industry has long studied and attempted to form a balance between production levels and environmental conservationist measures. Improvement of environmental concerns are sought mainly in a pragmatic approach, from making plants more efficient to the conservation of natural resources and maintenance of societal living standards (Fullerbach, 1981). Again, governmental concerns have played an active role in this change, however industrial innovations provide solutions to those concerns. In 1978 the European Community significantly tightened restrictions on the emissions of exhaust gases from automobiles (Vogel, 1993). In five years, the automobile manufacturers met the emission standards and even exceeded them; this provided an opportunity for the community to improve emission levels even further. In order to meet these levels, businesses had to develop new designs and technologies for fuel injection and catalysts. Each of these were developed and implemented well within the time frame allowed. Political leaders of the European Community are discussing in depth questions of product quality and safety. In pursuit of a harmonised market, it is appropriate that standards be adopted across the board. However, these levels of 24 Cross Cultural Management quality, as set by the public officials, dictate the very details of production and materials used. For example, a recent European Commission discussion focused completely on the level of chocolate quality and the amount of vegetable oil used in manufacturing (Reuters, 1998). Businesses, with questions of safety and product levels defined so absolutely, merely have to comply with the directives set before them. Listening to the consumers is still important, as each business must meet competition in a very

diverse market. One may argue that in terms of priority, environmental concerns top the list, followed by consumerism, and then employees. Again, consumers and employees are necessarily valued but their welfare is definitively directed by governmental sources, as opposed to industrial leaders. Common Ethical Goals As can be seen, the priorities given to each subject are arranged differently for each region. Emphasis and progress are placed in one or two of the following areas: employee welfare, environmental conservation, or protection of the consumer. Societal views change and the focus of ethics in a society change as well. Each civilization wants to succeed and bring prosperity to its society. To be prosperous and successful means to satisfy the basic human needs equally, good jobs, livable surroundings, and the ability to purchase quality, reasonably priced goods. Therefore, each civilization is working toward the same goals. It is not unreasonable to assume that if one society has found a solution to an ethical problem that another society would use that solution to its own benefit. As regions interact and the current trends of globalisation become further developed, ethical considerations in each region will influence the others to a greater extent. This is held particularly true in the more economically successful areas. There is a free flow of information. Competition being what it is, businesses from one culture study their counterparts in other areas to find the source of success. The businesses become compelled to emulate those strong points of observed practices in the hopes of achieving similar success. Then, as that region becomes more successful it is in turn studied. Since business ethics are an integral part of these successes, the ethical concepts are, as a matter of course, studied, adopted, and improved. These improvements can be seen in a study of the Japanese business culture during the sixties to seventies. Many firms in Japan sent emissaries to Europe and the United States to study business systems. Invariably in that study certain concepts of ethical behaviour were observed as well. The firms combined these observations to create their own versions and laid the groundwork for Japans outstanding success. Conversely, in the United States, during the late eighties, businesses noticed the success in Japan and, not surprisingly, began to study the Japanese systems. These methods were observed, brought back and

implemented. Europe, in turn, has started to observe the United States and Japanese systems with the motivation to improve its own economy. Volume 8 Number 1 2001 25 It is clear that as cultures interact, they are exposed to various concepts of business ethics. There seems to be a movement to a common, global definition of business ethics. As the world becomes smaller through enhanced communications, general attitudes and behaviours become similar as well. Currently, the methods in the attainment of these ethical goals differ from culture to culture only because global interaction has been on the fast track for a mere fifty years. The more cultures interact, the methods they use will become even more similar. With moral goals being equal, the resultant trend is upward. As each successful method is adopted and improved, the overall ethical level is improved as well. The general improvement in business practices can be best represented by the Japanese concept of Kaizen, or small steps toward perfection. Using this concept as a model, cultures can constantly improve ethical methods, attitudes, and results by small inexorable steps. The steps are represented by the interaction of the three regions discussed here. Currently each region emphasises one or two particular areas - employees, environment, or consumers. The overall improvement between the three thereby becomes balanced. Business ethics is humanity-based not culturalbased. Culture merely defines the priority that certain ethical aspects take. Every employee wants to be treated with dignity, every consumer wants to be protected, and everyone wants a livable environment long into the future. 26 Cross Cultural Management

References Andersson, Thomas. 1993. Japan: A European Perspective, Summarizing and Concluding Remarks. Proceedings from the conference, Japan in a Global Economy - A European Perspective, Sept. 5-6, 1991, Stockholm, Sweden. Forsyth, Michael. 1994. Community Laws That Cost Europe Jobs. Forward, Issue No. 8, Autumn 1994.

Fullerbach, Josef. 1981. European Environment Policy: East and West. German Society for Foreign Affairs, Bonn, 1981. Hagman, Bertil. 1991. Europe-Japan: Strengthened Relations. Proceedings from the conference, Japan in a Global Economy - A European Perspective, Sept. 5-6, 1991, Stockholm, Sweden. Krugman, Peter. 1984. Import Protection as Export Promotion: International Competition in the Presence of Oligopolies and Economies of Scale. Monopolistic Competition and International Trade, edited by Kierzowski, H., Clarendon Press, 1984. www.abcnews.com/section/businessdailynews/chocolate980515/index.html, Cuckoo for Cocoa? Reuters, May 15th, 1998. Swartz, Jacqueline. 1980. Pop Bottles: The Explosion of David Barham. Graduate, University of Toronto Alumni Magazine, January-February 1980. Case Study reprinted in: Braybrooke, David, 1983. Ethics in the World of Business, Rowman & Allanheld. Vogel, David. 1993. Environmental Policy in the European Community. Environmental Politics in the International Arena, edited by Kamieniecki, Sheldon, State University of New York, 1993. Volume 8 Number 1 2001 27