Culture and Ethics in Business

Prof. Christopher Balding

March 19, 2015

The Ethics of Renting a Girlfriend In recent years, young men and women pressed by their families to bring their girlfriends home with them for the seven-day Spring Festival prefer to rent total strangers, just to avoid long lectures and appease their relatives. Single men and women have it tough in China, a country where most parents go to any lengths to see their offspring settled down with the right person…. Nowadays, Chinese bachelors are looking for a temporary solution, and this led to the creation of a whole new niche – girlfriend/boyfriend rentals. All they have to do is go online, access Taobao (China’s version of eBay) and choose between the different sellers offering the unusual service…Girlfriend and boyfriend renting services are relatively new in China, and although a lot of people don’t approve of such practices, they are quickly gaining popularity. One of the reasons for this could be a successful TV series called “Renting a Girlfriend for Home Reunion”, that aired in 2010. It tells the story of a young man sick of going on blind dates set up by his parents, who decides to rent a girlfriend and ends up falling in love and marrying her.

Questions

• Has anyone heard of this before?

• Does anyone here know of someone that has done this?

• Is this ethical?

• Is it acceptable to expect us to be honest with customers but lie to our parents?

JPMorgan faces fresh scrutiny over Asia hiring practices

JPMorgan Chase’s hiring of the son of a Chinese commerce minister is being scrutinised by investigators looking at whether the bank improperly hired relatives of government officials to win influence and business…Mr Gao, who is now employed by Goldman Sachs, started working full-time at JPMorgan in 2007 in spite of negative reviews from colleagues, which were revealed in emails published on Friday by the Wall Street Journal.

JPMorgan faces fresh scrutiny over Asia hiring practices cont.

In a 2008 email, Fang Fang, then chief executive of JPMorgan China, wrote to Gaby Abdelnour, then the bank’s head of Asia, to say that Gao Hucheng, the China vice-minister for commerce, had “spent [a] long time explaining to me why it is important for the son to find another position within JPM . . . because he is desperate to maintain his hard-won H1-B visa which is under JPM sponsorship”.

JPMorgan faces fresh scrutiny over Asia hiring practices cont.

“The father indicated to me repeatedly that he is willing to go extra miles to help JPM in whatever way we think he can,” the email continued. “And I do have a few cases where I think we can leverage the father’s connection.” The junior Mr Gao and Mr Fang could not immediately be reached for comment. JPMorgan and Goldman declined to comment. It followed a 2006 email about the junior Mr Gao where he was described as having done “very very poorly in interviews — some MDs [managing directors] said he was the worst BA candidate they had ever see[n]”.

Ethical Questions

• Did JP Morgan act ethically in hiring Mr. Gao?

• Does the ethics of their behavior change with the cultural environment?

• Is this type of business behavior unique to China?

• Was it ethical (legal) to imply future business for hiring of a preferred person?

Bhopal B

• What decisions made by the Union Carbide and the local subsidiary were identifiable prior to the accident as significantly increasing the risk of an accident (raising ethical concerns)?

• Provide examples of where the company and/or managers made clearly unethical decisions.

• How do we think of Bhopal as future managers?

The Merck Framework

• Can you be at fault ethically by not doing enough?

• How much knowledge do you need to make a decision?

• Did Merck convince themselves of something that wasn’t true?

My Pet Peeve

• I have heard students and different people say they believe in Chinese values.

• Very few people can tell me what THE definition of Chinese values is.

• People can tell me what THEIR definition of Chinese value is but not THE definition.

• Saying you believe in Chinese values without being specific about what Chinese values are means you are saying absolutely nothing.

• Chinese values are changing and being debated.

The Eastern Philosophy and Business Ethics Framework

• What are the specific values of Chinese or Confucian culture that translate into ethical standards you should live by and consider for business behavior?

• What specific values or beliefs do you think Chinese/Confucian values or philosophy can contribute to the practices of Chinese and international business?

• If the measure of a person or a society is how well it adheres to its stated belief system, how well would you say China or Chinese people adhere to “Chinese values” or Confucianism?

Five Business Philosophies

• Which business philosophy do you identify with more? Why?

• Which business philosophy do you think is best? Why?

• Which business philosophy do you think is best suited for China? Why?

• Are these philosophies contradictory or are they mostly the same with a different emphasis?

Cases and Foundational Readings

The Details

Complacency or Ethical Lapse?

“The design for the plant came from Union Carbide Corporation, the world expert in MIC technology with 20 years experience handling the harmful chemical. His engineers were among the scientific elite in India. Most of them were better trained even than their American counterparts. Indeed, no one had anticipated this worst case scenario. As industrial sociologist William Bogard wrote, “No one seemed to seriously believe that all the crucial safety mechanisms at the facility could fail simultaneously.”

Was Cost Cutting the Problem?

“Why have 12 operators working per shift when six would do? Why replace leaky pipes when a patch job would work? In spite of his efforts, by 1984, the plant had lost $4 million. Still, Mukund thought he had done his best in a difficult situation. He never thought he sacrificed safety for the bottom line.”

How Good was Safety?

“…Mukund had been proud of his safety record…his plant had the best safety record in India. The plant racked up two million safe hours, which was impressive for an American plant, let alone one in the less stringent Indian manufacturing world. In 1983, the plant even received a safety award from Union Carbide Corporation for this feat… Although the plant had stringent safety guidelines and standard operating procedures (SOP), these were often not followed.”

Complacency Part II

“Yet the answer to preventing the Bhopal disaster was not as simple as installing a few backup safety systems…The leak occurred in spite of backup systems, in spite of $5 million in upgrades that were supposed to make a “safe plant safer,” and in spite of heightened awareness…. ‘The reliance on complex backups may also give rise to unwarranted feelings of security that divert attention from the most immediate form of the hazard, viz., the production of hazardous chemicals itself.’”

Broken Windows and Pilots

• The “Broken Window” theory of preventing crime

• Does preventing broken windows prevent oil spills?

• Do planes crash planes or do pilots crash planes?

Merck and Vioxx I

Merck decided not to conduct such a study, instead opting to monitor clinical trials that were currently being conducted, or were planned, to test Vioxx for other purposes. Merck officials decided that giving placebos and Vioxx to at-risk patients in order to compare side effects would be unethical… an e-mail written on March 9, 2000 by Mercks then research chief, Edward Scolnick, to his colleagues states that the cardiovascular events are clearly evident. In the same e-mail message, he also indicated that if the results of the VIGOR study were to become public, they should be presented in a manner so that it is apparent this was an effect of all COX-2 inhibitors, not only Vioxx.

Merck and Vioxx II

“Numerous experts in various medical fields were consulted. Interestingly, some doctors advised keeping Vioxx on the market, since some of their patients had responded particularly well to Vioxx and could not easily switch to an alternative medication. Others recommended pulling Vioxx from the market.”

Merck and Vioxx III

The results from these clinical trials served only to initiate speculation of these health risks; firm conclusion could not be drawn. Although the idea had been proposed and evaluated, Merck executives ultimately decided not to proactively seek answers to the question at hand: was Vioxx responsible for the increased risk of heart attack and stroke in these patients? They chose instead, citing ethical reasons, to monitor on-going studies in place that tested other effects of Vioxx. Consequently, the drug continued to be sold for over four years before it was ultimately withdrawn. Meanwhile, Merck continued to reap profits from this popular drug.

Merck and Vioxx IV

“During the intention stage of the decision making process, the decision maker faces the dilemma of choosing to perform the ethical behavior or unethical behavior. This may cause an internal conflict within the decision-maker as he/she weighs the consequences of his/her actions. While the decision maker may perform a behavior that is considered unethical, he/she will be reluctant to admit doing so.”

Eastern Philosophy and Ethics

• “…although it is now fashionable to allude to Asian values, it is far from clear what this term means.”

• “Identifying a ‘core’ set of Asian Values is not the only problem. Even if there were some widely shared values within this region, these values would not be static. Asian Values would be just as subject as Western ones to the transforming effect of political and economic factors.”

• “The contrast between Asian and Western values is misleading because it seems very unlikely that there is some monolithic static set of Asia (or for that matter, Western) values.”

Eastern Philosophy and Ethics

• “Society cannot be the result of a voluntary decision by citizens to come together and to agree to show each other mutual good will. Trust exists because we are all always already related to each other in a variety of ways – as parents of children and children of parents; as spouses, clients, employees, supervisors, subordinates, etc. We move within these relations conforming to expectations we did not form.”

Eastern Philosophy and Ethics

• “An action or choice is not good simply because it has take into account the interests of stockholders or many stakeholders. It goes without saying that the effect of one’s actions on the larger social matrix of relations must always be considered. It is also necessary for the actor to consider the long term effect of her actions on relations.”

• “…an obligation does not derive ethical value from the fact that a rational being would make this demand and want to enforce it. Whatever ethical worth it has comes from the agent’s perception or intuitive understanding of her place in the whole of human relations.”

The Five Philosophies

• “If all corporations operated in a perfectly efficient market (which they do not) and if the market took account of all of society's interests (which it does not), then there would be no need to worry about different business philosophies.”

• “…corporations are now being criticized for not responding sufficiently to society given their size and re sources.”

The Five Philosophies: Machiavellianism

The Machiavellian philosophy states that a business firm is a self-contained organism with its own 'natural' laws which can be bent but not broken. Hence, expediency must take precedence over virtue for one to succeed. Furthermore, since there are no categorical imperatives in business, moral actions are only those which are effective in accomplishing some purpose. Thus, Machiavellianism is amoral in the sense that the end, which is usually winning, is sufficient justification for the means.

The Five Philosophies: Objectivism

“Rand does not consider the real world to be at odds with ethics. In deed, morality is the ability to be faithful to the real world by avoiding ethical judgements based on feelings. And since Rand's government exists to protect the natural rights of individuals, freedom becomes the right to defy fate by making rational decisions which lead to productivity and happiness. Therefore, profit is the result of reason and an ethical life comes from productive reasoning. In this view, then, evil individuals are those who survive as parasites living off of others, as in a government welfare state.”

The Five Philosophies: Social Darwinism

“…individuals, by pursuing their own selfish interests, unwittingly and effectively promote the social welfare. …According to the precept 'survival of the fittest,' then, businesses survive because they obey the natural laws of competition. Hence, only the strong are good and morally superior in a laissez-faire environment. Although some suffer in the struggle, society will be improved as the inefficient are eliminated. In a sense, then, Social Darwinism is amoral since the laws of evolution and natural selection are not amend able by human intervention. The business system is thus based on survival, profit maximization, competition, self-interest, and the ability to cope with economic inevitabilities.”

The Five Philosophies: Ethical Relativism

“Ethical Relativism departs from business philosophies centered around the individual to one in tended to serve the group or society. Here, ethics does deal with feelings and attitudes and is based on social convention which accepts behavior sanctioned by established group norms. Hence, moral good means conforming to the way things are in a given time and place and Rand's selfishness becomes the root of all evil. Thus, conventional morality justifies the 'commonly accepted practice' argument in business. Those unable to adapt to the particular culture will suffer and questionable practices may eventually be seen as ethical under different circumstances.”

The Five Philosophies: Universalism

“The opposite of Ethical Relativism is a belief that there are absolutes and all behavior should be evaluated by the same rules regardless of consequences. That is, moral values and principles are eternal and should apply Universally, being equally valid in all places and times….this is similar to Confucian ethics which holds that all interdependent parties must follow predetermined rules of obedience, loyalty, respect, and hard work so as to optimize their mutual benefits.”

Actions and Ethics “…it was my fault she sobbed, and it was true, no one could deny it,

but it is also true, is this brings her any consolation, that if before every action, we were to begin by weighing up the consequences, thinking about them in earnest, first the immediate consequences, then the probable, then the possible, then the imaginable ones, we should never move beyond the point where our first thought brought us to a halt. The good and the evil resulting from our words and deeds go on apportioning themselves, one assumes in a reasonably uniform and balance way, throughout all the days to follow, including those endless days, when we shall not be here to find out, to congratulate ourselves or ask for pardon, indeed there are those who claim that this is the much talk of immortality.”– Jose Saramgo Nobel Prize winner and author of Blindness

Bhopal Take Away: Framing Our Future Discussions

• If you leave today thinking you understand business ethics and that you will enter the work place prepared to always make the right and ethical decision you have missed the point

• If you leave today thinking all “ethical” decisions will present themselves as right and wrong…you are wrong

• If you leave today thinking unethical decisions are only taken by bad people trying to do bad things, you do not understand the case

Bhopal Take Away: Framing Our Future Discussions

• Small and seemingly insignificant decisions can have large implications later

• Ethical decisions are frequently hidden beneath a layer of normal course of business decisions

• The truth and ethical decisions are complex and difficult

• Ask yourself honestly how would you have acted differently?