Ethics in Emerging Economies Implication for Businesses · when surveyed for the perception of...

Copyright © 2003 by the Center for Ethical Business Cultures®. 1

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Copyright © 2014 by the Center for Ethical Business Cultures®Celebrating over 35 years of business commitment to ethical cultures.

Ethics in Emerging EconomiesImplication for Businesses

Ron JamesPresident and CEO

Center for Ethical Business Cultures

24 October 2014


Copyright © 2014 by the Center for Ethical Business Cultures®

About the Center for Ethical Business Cultures

Mission

To assist business leaders in creating ethical and profitable business cultures at the enterprise, community and global levels

Background

36 year old nonprofit organization

Partnership with Ethics Faculty at University of St. Thomas

Member of the Advisory Group to the US Sentencing Commission

Advises Boards and Executive Leaders on “Tone at the Top”

Building a Bridge Between Thought and Practice Leadership


Ethical Perception Research Articles

2006 – 2009 ‘Assessing the good company.’ Academic and Professional Journals2010 ‘Dimensions of Ethical Business Cultures: Comparing Data from 13 countries

of Europe, Asia, and the Americas.’ Human Resource Development International.

2012 ‘Minding the gap: exploring difference in perceptions of organizational ethics between executives, mid-level managers and non-managers.’ Human Resource Development International.

2012 ‘Ethical cultures in large business organizations in Brazil, Russia, India, and China.’ Journal of Business Ethics.

2013 ‘Building Ethical Business Cultures: BRIC by BRIC.’ The European Business Review.

2013 ‘Ethical Business Culture, Organizational Performance, and Employee Outcomes: Establishing a link between employee perceptions of ethical culture and performance metrics.’ Business Ethics: A European Review.

2014 “Modern Risk Management Through the Lens of the Ethical Organizational Culture.” Risk Management Journal



Understanding the Environmentand the Model of Ethical Business Cultures


Misconduct at Work:• 41% observe it

• 63% will report it (2013 EBS - Ethics Resource Center)

Legislating Good Behavior:• Sarbanes – Oxley Act 2002

• Dodd – Frank Act 2010

• But you can’t legislate integrity!

Trust:• 62% trust business

• 18% trust leaders in business to tell the truth (2013 Edelman Trust Barometer)

Confidence in Leaders:• 15% have confidence

in leaders in business to do what’s right (2012 Harris Confidence Poll)

The Ethical LandscapePersistent Challenges

Source: Ethics Eesource Center 2005

Cost of Ethical Breakdowns:• Typical global organization

loses 5% of annual revenues

• 40 to 50% do not recover losses (2014 ACFE Report on Fraud and Abuse)



StakeholderBalance

LeadershipEffectiveness

Long-termPerspective

ProcessIntegrity

ValuesDriven

•Mission Before Profit•Long-term before Short-term•Triple Bottom Line•Board Takes the Long View•Leaders Build for Next 50 Years

•Establishes & Models Behavior•Demands Ethical Conduct•Exhibits Great Personal Integrity•Doesn’t “Shoot the Messenger”•Does What He/She Says

•Balances Interests•Consistent Approach•Balances Value & Profit•Community / Global•Respect & Fair Treatment

• Dedication to Quality•On-going Training•Aligns Performance Appraisals & Promotion•Corporate Governance•Open / Transparent•Mission is Evident

•Clarity of Values•Institutionalizes•Trust & Respect•Eliminates Misfits•Builds for Long-term

•Scope & Methods of Evaluation•Feedback•Measurement Driven Adjustments

Assessment


The Ethical Perception Index:Linking the Model of Ethical Business Cultures



Global Employee Perspectives on Ethics in the Workplace

CEBC Ethics Themes: Able to discuss ethical

issues/concerns

Senior management practices ethical conduct

Company serves interest of multiple stakeholders

Co-workers behavior consistent with values

Must demonstrate company values to get ahead

Ethics themes benchmarked globally through Kenexa, an IBM Company, WorkTrendsTM

Countries Surveyed:United StatesArgentinaAustraliaBrazilCanadaChinaDenmarkFinlandFranceGermanyIndiaItalyJapanMexicoNew Zealand

The NetherlandsRussiaSouth AfricaSpainSwedenSwitzerlandTurkeyUnited Kingdom IndonesiaKoreaKingdom of Saudi

ArabiaUnited Arab Emirates QatarIreland

StakeholderBalance

LeadershipEffectiveness

Long-termPerspective

ProcessIntegrity

ValuesDrivenMEBCEPI

1 23

4

5

Themes

Linking the CEBC Model of Ethical Business Cultures with the Ethical Perception Index


The CEBC Ethical Perception Index by Country

Ethical Insights: Working Across Cultures -Business and Ethics in China

Cambridge University Press –Ethical Business Cultures inEmerging Markets

Ethical Cultures in BRIC

13 Country AnalysisMinding the GapStrong/Weak Culture

Ethical Perception Index

TEBR


The CEBC Ethical Perception Index by The Gap

CQ7_3‐WhereIwork,ethicalissuesandconcernscanbediscussedwithout

negativeconsequences.

CQ7_4‐Myorganization'sseniormanagementsupportsandpracticeshighstandardsofethical

conduct.

CQ7_6‐Myorganizationstrivestoservetheinterestsofmultiplestakeholders(e.g.,customers,

employees,suppliers,andcommunity),notjusttheshareholders.

CQ7_7‐ThebehaviorofthepeopleIworkwithisconsistent

withmyorganization's

mission,vision,andvalues.

CQ7_8‐ WhereIwork,peopledonot'getahead'unlesstheirbehaviorclearlydemonstratesmy

organization’svalues.

EPI

3.45

3.59 3.58

3.38

3.18

3.453.53

3.64 3.68

3.46

3.25

3.52

3.72

3.83 3.85

3.67

3.42

3.70

4.21 4.20 4.23

4.11

3.89

4.13

TheGap– MeansIndividualContributor Front‐LineSupervisor Mid‐LevelManager Executive/SeniorManager

Source: Kenexa, an IBM Company, 2012 WorkTrends™



Minding the Gapby Countries

Source: Ardichvili, A, Jondle, D., and Kowske, K. (2012). Minding the gap: exploring differences in perceptions of ethical business cultures among executives, mid-level managers and non-managers. Human Resource Development International, 15 (3): 337-352.


Strong/Weak CEBC EPIby Outcomes

EPI CUSTOMERORIENTATION

INNOVATION MYFEELINGABOUTWORK

MYORGLEADERS

MYORGPERFORMANCE

QUALITYANDIMPROVEMENT

RETENTION

2.38

3.24

2.482.63

2.33

3.12

2.832.66

4.39 4.37

4.094.26 4.25 4.27 4.36

4.17

Strong/WeakCEBCEPIbyOutcomesWEAK STRONG

Source: Kenexa, an IBM Company, 2012 WorkTrends™



Academic Publications

Ardichvili, A., Jondle, D., Kowske, B., Cornachione, E., Li. J., and Thakadipuram, T. (2012). Ethical Cultures in Large Business Organizations in Brazil, Russia, India, and China. Journal of Business Ethics, 105:415–428

European Publications

Ardichvili, A., Jondle, D., Wiley, J., Cornachione, E., Li. J., and Thakadipuram, T. (2013). Building Ethical Business Cultures: BRIC by BRIC. The European Business Review, March-April, 22-25.

Understanding Ethical Cultures in Emerging Economies: The BRIC’s


Findings are based on 13,000 responses from employees in large organizations in high growth emerging economies, Brazil, Russia, India, and China, and the US

Significant differences among the four emerging countries with Brazil and India more favorable than Russia and China

By 2050, the combined GDP of these four high growth countries will exceed the GDP of the G7 (seven largest developed economies)

But these four high growth economies rank toward the bottom when surveyed for the perception of corruption (Transparency International Annual Corruption Perception Index)

Authors: Alexandre Ardichvili , Douglas Jondle, Brenda Kowske, Edgard Cornachione, Jessica Li, and Thomas Thakadipuram

Ethical Cultures in Large Business Organizations in Brazil, Russia, India, China, & the US



The BRIC’s Ethical Culture in Large Organizations

BrazilPaternalism: superiors provide protection and

guidance for loyalty and deference from subordinates

jeitinho – middle path between regulation and what is practicable

Web of reciprocal obligations: Employee loyalty

Leader responsible for group well-being



RussiaState dominance of business sphere and legal

institution

Personal loyalty and in-group allegiances shape business behavior

Higher reliance on personal networks vs. legal contracts

blat – ‘‘reliance for favors upon personal contacts with people in influential positions’’



IndiaUnconditional loyalty

Places a premium on favors, friendship and clanship

Government acts as a gatekeeper, not an enabler Money and connections are how things are done

Intuitive decision making vs. normative



ChinaTrustworthiness – emphasizes personal

relationships not contracts

Adherence to rules and prior arrangements not equated to trustworthiness

Informal networks of support and reciprocal exchange of favors

guanxi – role-based duties provides privileges of favoritism and personal benefits to members of in-groups




Characteristics of Business Cultures in the BRICs and the US

PaternalisticParticularistic (Situational) Universalistic Collectivistic Individualistic Formal Informal

Brazil x x x x

Russia x x x x

India x x x x

China x x x x

US x x x x

Source: Ardichvili, A., Jondle, D., Kowske, B., Cornachione, E., Li. J., and Thakadipuram, T. (2012). Ethical Cultures in Large Business Organizations in Brazil, Russia, India, and China. Journal of Business Ethics, 105:415–428.



2.80

2.90

3.00

3.10

3.20

3.30

3.40

3.50

3.60

3.70

3.80

CQ7_3‐WhereIwork,ethicalissuesandconcernscanbediscussedwithout

negativeconsequences.

CQ7_4‐Myorganization'sseniormanagementsupportsandpracticeshighstandardsofethical

conduct.

CQ7_6‐Myorganizationstrivestoservetheinterestsofmultiplestakeholders(e.g.,customers,

employees,suppliers,andcommunity),notjusttheshareholders.

CQ7_7‐ThebehaviorofthepeopleIworkwithisconsistentwithmyorganization'smission,vision,and

values.

CQ7_8‐ WhereIwork,peopledonot'getahead'unlesstheirbehaviorclearlydemonstratesmy

organization’svalues.

EPI

TheCEBCEPI– UnitedStates2004 2005 2007 2008 2009 2010 2011 2012

22Source: Kenexa, an IBM Company, 2012 WorkTrends™



Next Up: Expanding the Research to More Emerging Economies: The MIST’s

Signed Cambridge University Press Book Contract in August, 2014

“Ethical Business Cultures in Emerging Markets:BRIC’s - Brazil, Russia, India and ChinaThe MIST’s – Mexico, Indonesia, South Africa and TurkeyContrasted with the original G7 – Canada, France, Germany,

Japan, Spain, United Kingdom, and the United States Publication in 2016 Leading Academics recruited from around the globe Engaging Business Practitioners to ensure essential

linkage between business and academic insights


As economic power shifts, there are implications for the ethical and cultural standards that will guide business behavior and interactions! How are we preparing to address this issue?

Questions and Discussion

Concluding Thought



For Information on CEBC

Phone the Center: 651-962-4120

Fax the Center: 651-962-4042

Email the Center: [email protected]

Visit the Web: www.cebcglobal.org

Write the Center: 1000 LaSalle Avenue, TMH 331Minneapolis MN 55403-2005 USA

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