Applied Ethics in Management

As the growth of a global economy exponentially develops, international technology transfer (ITT) becomes a reality. More than ever before, organizations—both private corporations and government agencies—are developing international networks to move information and technologies around the world at an ever-increasing pace. Before exploring the core issue of this chapter, the ethics of ITT, it is worth reflecting on global development. Four major factors that influence the growth of business are worth discussing: technology and communications; globalism; the merging of definably separate ‘entities’; and the decline of government/growth of corporatization.

It is argued that unless codes of ethics are applied as part of a strategic management approach, they quickly become empty window-dressing, at best; and a symbol of a cynical and dishonest management, at worst.

Corporate restructuring is now accepted as a periodic necessity to enhance shareholder value. Corporate restructuring is broadly interpreted here to include mergers, takeovers, divestitures, financial restructuring, and internal streamlining and efficiency improvement programmes like business process re-engineering. Restructuring is not only assumed to maximize shareholder value through improved productivity, innovation and customer value, as well as overall competitiveness, but it is also expected to direct resources to better use, by ensuring that such resources are managed by organizations and managers who have the competencies to do so.

Ethics is usually defined as the theory of norms or moral values. Moral values are basic to the social fabric of a people; they are the foundation of communal life. Moral values are guidelines for individual actions. They serve as guarantees for the behaviour of individuals being in accordance with the interest of the community. In sum, moral values serve the development of a good and just society.

Technological, ideological and economic forces of convergence are increasingly shaping a new era of globalization through cross-national business alliances. These alliances range from short-term project-focused collaborations to long-term joint ventures or strategic alliances. In many countries, governments are becoming directly or indirectly involved as partners of such alliances or through their role in establishing the regulatory regime that guides them. International business alliances have become imbedded in the ideas of market reform now in progress in many previously centrally controlled economies. A leading scholar summarizes this recent alliance phenomenon as follows:

In February 1998, AT&T announced plans to lay off 15,000-18,000 employees in the next two years. In the same month, Hoechst Chemicals announced the dismissal of 20,000 workers, whereas the Deutsche Bank projected that 9,000 would have to go in the coming years. Messages like these, about drastic changes in organizations, are hardly news any more. One reads them almost in passing. Organizational downsizing and restructuring has become business as usual. A 1991 survey of the 4,500 largest firms in the USA, by Fortune Magazine, revealed that 86% of these organizations had downsized in the previous five years and most of them expected to have to do it again. 1 In the USA, even the Roman Catholic Church, which is perhaps the oldest organization in the world, is reported to have lain off some of its core workers, namely priests. Jobs? They simply do not make them as they used to.

Over the last three decades, one of the world’s greatest revolutions has occurred: the ’Computer Revolution’. In every walk of life, in every organization, whether large or small, the computer has had an impact. In most cases, the impact has been so great that businesses simply could not function without this new technology. A new profession has emerged during this time; this profession has by no means reached maturity or even defined its own boundaries. This profession, known as the Information Systems (IS), Information Technology (IT), or Computer profession, was populated originally by computer scientists, as that was the educational background’ of those employed to implement and integrate computer technology into business. As time went on, business graduates, with knowledge of both business and how computer technology could make businesses more competitive, entered the profession. Recently, the profession has attracted those more interested in the management of the technology than in the technology itself. The addition of this management emphasis is starting to have a profound effect on the profession and on its relation to business and the community. The profession is now comprised of people with a huge diversity of educational and practical backgrounds, from the highly educated doctorates in computer science to the practitioners with no formal education.

Over the past two decades there has been a far-reaching change in attitude towards the ’proper’ balance between the private and public elements in both advanced economies and less developed countries (LDCs). So far as corporate sectors are concerned, although the same cannot necessarily be said of economies as a whole, there has been an inexorable transfer of resources from public to private ownership, accompanied by attempts to introduce a greater degree of competition.

The field of business ethics has attracted considerable interest during the recent past. A number of high-profile cases from all over the world have contributed to the call for greater oversight of questionable business practices, and for the introduction of courses in business ethics in Business School curricula. (To name just a few, there have been the cases involving Ivan Boesky and Michael Milliken on Wall Street; the Sumitomo copper-trading case in Japan; the Barings Bank case in Singapore; and from closer home, here in India, the Harshad Mehta stock-trading case). Interestingly, though, all of these cases, and many others from around the world that have attracted attention, have ultimately involved illegal activity, and the perpetrators in each case have faced legal action leading to jail terms in many instances. It is also worth noting that all the cases noted above have involved financial wrong-doing, which inevitably attract the greatest attention because of the large impact they have on financial/commodity markets. Yet, a number of business areas can present ethical dilemmas where money is not directly involved but, rather, questionable business practices relating to the use of information or know-how are of concern. Such situations can, for example, be found in the area of personnel and human resources, where confidential information regarding job applicants and work records may be involved; or in the area of marketing, where aspects of marketing practice relating to the proper way of handling customer records and information on competitors may be atissue.

Managers from countries such as China, India, America and Australia operate under diverse conditions, both within and beyond these countries. As business activities move increasingly across national boundaries, the range of cultural and economic contexts must be incorporated into management theory and practice.

In a shrinking and increasingly borderless world, where international business and cyberspace communications have changed the face of business, the role of public relations has also undergone transformation. The transnational communicator is operating under a new paradigm. This paradigm will be examined not simply from the point of the delivery of excellence, but in the light of its value-based and ethical standards.

A German consultant once narrated a story about crabs and Indians. He used a crystal bowl full of live crabs and showed how not a single one of them was able to crawl out of the bowl because each one was trying to pull the other down. The moral of the story was this: in spite of the fact that Indian technicians and managers are among the best in the world, they fail miserably in teamwork, and the reason is obvious.

Humankind is on the cusp of a major shift in economies. We are moving from the Industrial Era to the Knowledge Era in as significant a transformation as we experienced in the movement from the Agricultural to Industrial Era 200 years ago.

Three reasons and developments move the topic of shareholder value to the centre of the debate. The first reason is that competition for capital between firms and between national economies has increased, by the opening up and the globalization of the world economy. Particularly, the opening of the former communist economies has caused a new demand for capital, which was previously blocked from the world capital markets by the Iron Curtain. If the competitive pressure on the demand for capital, or on those who offer possibilities for investment, increases, a higher productivity of capital will be demanded, as more firms and economies compete for the same capital stock. As the labour factor must achieve a higher productivity if it is under competitive pressure, the capital factor must also increase its productivity if the scarcity of this factor and the competition for it increase.

Taxation is undoubtedly the hotbed of unethicality in India today. Tax evasions are estimated at more than one million million rupees, and are the single largest cause of wasteful use of top managerial and administrative talent; 1 tax evasion draws scarce human resources to a socially wasteful effort. As Pendse, a top manager of the Tata group whose mission is to tread the ethical path, says: ’A great human talent is wasted. I would like to see the day when none of us needs a tax manager. Alas, it cannot be true in our country.

With drug addiction and terrorism having become major global concerns over the last two decades, it has been realized that seizing (or immobilizing) the financial assets of the covert organizations involved is one of the most effective ways to neutralize such activities. From the 1980s there has been a flurry of initiatives (led by the USA) aimed at eradicating money laundering through the legitimate financial sector.