Culture and Ethics are two close components that revolves around business practices which raises some questions on how rights and wrongs can be either determined by cultural or societal norm. It has also been supported by Langlois et al. in 2014. Individual’s beliefs are different across diverse cultures which branch out to various ethics. While, Oplatka and Arar (2015) narrow down its explanation by stating that people’s standpoint of what is right or wrong are based on cultural dimension. Similarly, Reybold et al. (2008) suggested the same view where this help to shape individual’s actions and behaviours. A remarkable challenge in trying to internationalize business requires successful adaptation of diverse culture. This diversity has rapidly emerge among people with various backgrounds, beliefs (Mazur ; Bialostocka, 2010).
This debate has put dilemma to managers and organizations across countries which may interrupt their day to day business operations. What works in one country does not necessarily fit onto other country’s culture in shaping the ethical conduct of businesses in distinct countries. Mismatch of cultures may cause unwanted problems raises among employees and the firm. To examine the role of culture on business ethical conduct, this paper will approach the issue by using the Hofstede cultural dimensions and other related aspects. It is then followed by some recommendations on ways for different countries to cope with dissimilar cultures and subcultures in local and international context. This essay closes with conclusion and highlighting on the significance of ethical business conduct.
Back to the basic concept, it is important to look at organizational ethical climate (EC) of which it help to inform employees on perceptions of right or wrong and the level of ethics practice within a company. In a similar vein, Martin and Cullen (2006) pointed out that components such as beliefs, morals, attitudes present in EC will help employees to face diverse cultures at work. A strong ethical climate will drive more trust, respect for the firm and better decision making which contributes to effective business practices. Furthermore, EC has a notable relation with ethical practices (Shacklock et al., 2011 ; Fu & Deshpande, 2012). According to Kie et al. (2012), formal ethics code, codes of conduct (COC) and statement of values are utilized by worldwide in achieving good ethics within the firm. Ethical codes as a result of organization working collectively is much more appreciated and valued compare to conventional way of presenting formal written codes to employees which often being neglected (Nielsen & Massa, 2013). A bottom-up approach in developing codes of conduct can be considered. Arab is known to have large power distance where leaders will have the ultimate virtual power over its employees. Organizational leaders should have portray a good examples through the enforcement of ethical regulations and COC for the employees to comply to ethical standards. This will indirectly shows that the organizations prioritize ethical behaviour to be fully practice. Yet, a study by Mckechnie et al. (2007) pointed out that UAE organizations failed to provide written code of ethics as form of guidelines for their employees. In addition, practicing ethical leadership (Shin et al., 2015) and ensuring CSR’s satisfaction by employees (Al-Salam ; Speece, 2017) are key to superior ethical climate which determine business ethical conduct.
The ethical dilemma in businesses has further determined by the engagement of culture in different countries which has shaped the human conduct in business decision making. As of the leadership style in western culture of United States where expectation of good performance, values and behaviour is high, thus freedom of action is consider less when compared to Asia’s culture (Mills, 2005). According to Lefebvre (2011) of Hofstede’s cultural dimension, U.S. low power distance has distributed power more equally in the business organization with flat hierarchy structure. Due to the equal amount of power, every individual have the opportunity to be promoted in the organization (Youssuf ; Steinberg, 2017). This important element capture the leadership style of the organization’s ethics. For example, the U.S. business practitioners with low power distance are usually open with their business partners and not afraid of criticism. It is simply because the low power distance are more direct in communication where leadership style is based on expertise. Consequently, ethical decision making is made in a relaxed and comfortable way with a sense of equality (Crocamo, 2015).
In addition to this, another leadership dimension incorporated by western culture is the high employee’s empowerment in which it determined the component of value-based organization that creates the employee-centred ethical leadership. Hence, these empowerment leadership style is defined as the authority given to employees in a firm. These empowerment ability may lead to ethical misconduct by the employees in the organization as they might abuse the authority given to them. As adapted from a case study of the Health Care Fraud Report (Butts, 2005) nurses from one of the healthcare agency in the U.S. are found guilty due to the involvement in fraudulent scheme which they accepting gifts from pharmaceutical firms in exchange of prescribing the company’s medications. However, these ethical misconduct is strictly prohibited by law in western culture. Thus, from the book it suggested that cultural dimensions does affect ethical conduct of an individual (Butts, 2005).
Another context of cultural dimension that also play an important role in shaping the ethical conduct of a certain organization is the dimension of uncertainty avoidance. According to (Crocamo, 2015) uncertainty avoidance can be understand as an extent where the individuals are doubt due to the feeling of uncomfortable or threatened by a certain things or situations. Based on Hofstede’s approach, a strong uncertainty avoidance will actively react in seeking for security in protecting themselves when compared to someone with weak uncertainty avoidance. Thus, a business manager from western culture such as U.S. who adopt a weak uncertainty avoidance are more likely to be less aggressive and tolerant in accepting any deviations from the employees or their business partners. Hence, these cultural dimension is also one of the key role in influencing the ethical conduct of an individual. Likewise a country with strong uncertainty avoidance (e.g. Germany and Italy), the business managers are tend to be intolerant with the company rules as well as strict standards (Crocamo, 2015). In which it resulted in creating a formal statement of ‘Code of Conduct’ where ethical decisions are based on shared common goods.
Accordingly, ethical conduct is also might get influence by the Hofstede’s cultural dimension of Individualism and Collectivism. Generally, western culture especially in the U.S. is adopting the cultural dimension of individualism. According to Hofstede Insights (2017) individualism is a situation where the social relationship are loosen between individuals in a society and they were expected to be independence for their own selves or immediate family. Hence, this type of trait believed in self-realisation as they understand themselves as unique and independent. As extracted from the journal article by Carcamo (2015), an individualist is more likely to be a loyal person due to the characteristics of individual bias as well as their commitment in taking responsibility. Moreover, an individualist manager will have an honest and direct communication to its employees which positively influence the ethical conduct. As an example to this, business practitioner in western culture are committed in their work hence they tend to make planning for any task as well as in making decision (Carcamo, 2015). Furthermore, an individualist believed that success is achievable by doing a lot of practice.
In addition to this dimension, according to Taleghani et al. (2010) the Americans are taking their work performance seriously because these society are enjoying their hard work and desire to achieve success as well as getting reward based on their performance. In oppose with the self trait of the collectivist such as Japan and China who business manager are preferred to employ close relatives and friends as their employees, an individualist business manager believed in employing someone close (i.e. Nepotism) is a disruptive conduct made by a leader. Thus, a leader in the U.S. must aware with the decision making they are making to avoid in engaging any unethical conduct in the business organization for instance in employing their staff.
Following individualism, dimension of collectivism need to be taken into account as well in assessing the role of culture in a particular country. As studied by Husted and Allen (2008) who proposed that these dimensions have greater impact on ethical decision making. Considering China as an example which can be characterised as collectivists. Hofstede (1997) define collectivism as cultural system that favours group’s beliefs such as families or close colleagues. In this type of culture, loyalty and respect are key where Chinese value individual’s sacrifices made for the group (Gudykunst, 2003) which limits individual to speak out his/her opinions in business decision making. This can affect the decision making process as it will be influence by the group’s interest and thoughts (Hofstede et al., 2010). What is more, fairness and equality are crucial to the in-group where people need to adhere to the ethical standards set by the group. This means that hierarchy level is important in abiding to rules, code of ethics and other regulations. Not to mention that, self-reliance is being less focused in this collectivists culture and thus leading to homogenous decision making. In addition, chinese collectivists culture prioritize group harmony and thus using less direct communication towards others as to avoid any offensive moves. Above all, if the superior of the group is consistently practicing strong ethical cultures, other in-group members will follow in ensuring ethical business conduct for the firm.
One of the countries that poses many challenges and opportunities is doing international business in the Arab world. Disguised bribe which is common to be practised in Arab’s business culture as this behaviour is treated as gift-giving act (known as ‘wasta’) per se. Despite that, this act is often being questioned and thus lead to misunderstanding by other cultures. Commonly, establishing good connection and relationship would be the main priority in dealing with Arab business managers which follows by discussing business matters at a later stage. This is where verbal agreements are usually definite and it determine the business relationship. It is also believe that regardless of world modernization, wasta will still play a role and continue to function in the Arab business practices (Hutchings & Weir, 2006).
Likewise, China has also practicing this too which is typically known as ‘guanxi’. This cultural practices are still relevant to today’s world where the need to comply and understand their cultures are crucial for any stakeholders. According to Al-Khatib, Vollmers and Liu (2007), guanxi inter-personal connection allows easy access to retrieve information, speed up decision making for business dealings. This disguised bribes falsify the basic function of gift-giving culture due to the involvement of self-interest and dishonesty. Other rule-bases cultures such as among westerners may have perceive differently which is considered to be unethical. Yet Hutchings and Murray (2002) argue that so long as the gift does not affect the receiver’s decision, it should not be categorized as part of bribery or even corruption. To add, Chinese business culture often look at Confucian system whereby ethical codes are based on past history’s lessons while eliminating religion concept. Due to the fluid foundation of religion and traditions, thus China is said to be more tolerant to unethical behaviour. It is proven that this system is still dominating Chinese business world (Bedford, 2011).
All in all, based on the stated examples given above, it is crucial for global business managers to understand their business partners in other countries as well as to know how to adopt their own company’s ethical standards in such a mixed environment. Hence, culture assessment in business is a key tool in having better understanding about the drivers of ethical behaviours in a business firm. Business manager and the subordinates should balance any possible factor that interplay in the organization especially to those companies that partner up with international business practitioners. The cultural dimensions by Hofstede is one of the important element that could clearly explain the role of culture in influencing the individual’s decision making as well as the ethical judgement. As recommendation to this, a leader should adopt a correct leadership conflict management style (e.g. Competing, Compromising, Collaborating, Avoiding and Accommodating) that is best suited in the organization. Thus, these efforts made to adapt the cultural dimensions with business environment is important to be fully understand in order to reduce any possible risk.