Chapter 16:CASE STUDIES: PERSONAL DECISIONS

CHAPTER 16

Case Studies: Personal Decisions

THE MEASURE OF A MAN’S CHARACTER IS WHAT HE WOULD

DO IF HE KNEW HE NEVER WOULD BE FOUND OUT. – BARON THOMAS BABINGTON MACAULEY, EARLY 19THCENTURY ENGLISH HISTORIAN

THE HEART AND SOUL OF ETHICS TRAINING is the case study. They are used to illustrate how individuals should analyze situations they are likely to meet on a regular basis in the performance of their duties—especially those tricky “gray areas.” As in real-life situations, the cases presented in this chapter do not always have a “right” or “wrong” answer. The key point to many of these cases is that when dealing in an international environment, a manager or businessperson must consider many different factors before deciding on a course of action. Culture can, and often does, play an important role in formulating what an individual may view as the best ethical course of action. And not all cultures, nor individuals within a single culture, will agree what that course is.

Case One: The Super Salesman

You are the marketing director in the Eastern European region for a large

British-based multinational manufacturer of consumer retail products.

Competition from other multinationals, as well as from locally branded products, is particularly intense in home cleaners. You have a salesman in Romania who not only meets his monthly sales targets of cleaners, but also exceeds them by a wide margin. It comes to your attention (from a competitor, no less) that this super salesman may be involved in some practices that are against your company’s basic ethics code. You know that these practices, like promising a small “rebate” to the customer against the salesman’s commission, are common practice in

Romania. What course of action would you take? A.Fire the salesman. He is in clear violation of the company ethics code and should be dismissed.

B.Look the other way. After all, you know that his practices are acceptable in

Romania, and besides, he is producing. C.Explain to the salesman that your corporate ethics code and the company’s global ethical standards supersede those often followed locally and he needs to bring his practices in line with company standards, even if it will cost him and the company sales.

EXPLANATION Alternative A (firing the salesman) may be an appropriate answer if he worked for the company in its home country. In this case, it shows cultural insensitivity and no understanding of how the real world operates in “ethical gray areas.” The punishment appears to be too harsh. Alternative B (looking the other way) is morally a dead end. If allowed to continue it could make managing the operation in Romania impossible. It could also have a negative impact on morale, both at home and in the local country. Why have an ethics policy at all? Alternative C is probably the best answer. For a corporate ethics code to be effective (and payoff on the bottom line), it must be enforced, and employees must be trained and encouraged to follow it. If this company is serious about its international ethics policy, it will take the time to educate and train foreign staff in its importance and how to use it. It must be made clear that high ethics standards are more important than the value of incremental sales made unethically. It is the company’s task to show how the global ethics policy is connected to the big picture.

Case Two: The Borrower

You find that your company’s local agent in Moscow (ownership of the local enterprise is split 50-50) has been using office equipment to help run some of the other businesses he owns in the country. He has “borrowed” software to run his payroll for the other businesses and even used a dump truck to remove rubble from a renovation project for offices in his own businesses. This seems to overstep the ethical line. This is a smart and fairly sophisticated guy and you can’t believe his explanation that he didn’t really see what you were so upset about. “I didn’t do anything wrong,” he says. You feel he is playing you for a sucker.

EXPLANATION To your Russian partner, it is certainly reasonable to use the equipment since he has ownership rights in both companies. The arrangement is efficient and does not appear to be unethical. The ethics of private property ownership are new to

Russia. He is the owner of two companies, hence, the equipment is his to use as he sees fit. No, he is not playing you for a sucker; he simply may not fully understand that the capital belongs to the joint venture, not to him personally.

Case Three: The Reluctant Whistle-Blower

Your North American company has a thriving accounting and auditing business in Japan. A junior employee learns through after-hours conversations that her boss has been engaged in some less than ethical behavior with a client that constitutes a clear conflict of interest; yet, she says nothing, choosing to ignore your company’s “international ethics hotline” meant for just such an occasion.

What is your reaction when the scandal comes to light? A.Fire them both. Knowing and failing to report a violation is the same as actually committing the violation.

B.Send a memo out to all Japanese employees about the importance of using the hotline to report violations. C.Fire the boss and keep the junior employee—with a warning put in her personal file for failing to report the violation

EXPLANATION None of these alternatives seem completely appropriate in this case. First, whistle-blowing in any Asian culture may be viewed as an unethical act in itself; any employee that does not take advantage of a corporate hotline should not be held to blame. Silence, even about illegal conduct, is considered a method of mutual protection from arbitrary accusation and punishment. Also, respect for elders and the strict hierarchy of power (in Asian cultures) would prevent any junior employee from informing on a superior. The thought of upsetting group harmony (a key to the teachings of Confucius is maintenance of group harmony) by informing on a boss is probably unthinkable to most Asian workers. The notion that a junior employee would cause a boss to lose face is farfetched, even today.

Case Four: The Personnel Manager in China

You have what you consider to be a first rate local director of human resources for your company’s joint manufacturing venture in China. She is young (36 years old), enthusiastic and highly competent. However, after more than two years in the job, you begin to notice a pattern emerging. She refuses to hire anyone older than herself, despite the great qualifications and experience of some candidates. You tell her that failure to consider older qualified candidates is hurting the company. She promises to do better, yet the pattern persists. What is happening here?

EXPLANATION Confucian norms dictate that among the five relationships that should always be observed is the deference youth pays to maturity. Chinese culture, age and experience are highly valued and Chinese business leaders look down on young negotiators. They cannot take them seriously. The Chinese human resources director is subconsciously avoiding a situation that would abrogate the norm— one in which she would appear to be superior to an elder.

Case Five: A Factory’s Safety Standards

Intermake is a European-based clothing manufacturing corporation with plants in several sub-Saharan African countries. The company pays above average wages and provides better than average working conditions for the region. It also pays its expatriate foreman on a European scale. The local media has been critical of Intermake because it has a two-tiered approach to injuries on the job. If an expatriate worker is injured, he/she is taken to the region’s private hospital. If a locally hired worker receives the same type of injury, he/she is taken to the local, poorly-staffed hospital or simply sees the company nurse.

Intermake says its treatment of local staff is comparable, if not better, than other manufacturers in the country. Most don’t even have a plant nurse on staff. Also, the company’s medical policy has not deterred locals from applying for work. In fact, it has a huge backlog of potential hires. Besides, in order to recruit expatriates to work at the plant it has to provide exceptional medical care.

EXPLANATION While there appears to be only one answer to this question in theory—it isn’t fair to discriminate under any circumstances—in reality you have to determine if

Intermake’s two-tiered policy is discriminatory in the classic sense of the word. Is

Intermake really discriminating based on race or ethnicity in this case? Perhaps not. There are two different ethical considerations. First, there is hard core ethics.

Can you treat employees on a discriminatory basis for a similar illness? The answer is obviously no. The second part deals with what kind of facility a person is entitled to—and there the standard should be similar to the perks and status that they enjoy in relation to other working conditions. Bosses get perks—and the perks may include superior medical care. The key is whether the medical care offered local workers is sufficient to ensure the same likely outcome of an injury. Some would argue that it is only Intermake’s ethical responsibility to ensure that the care it gives its local workers is adequate to ensure a good chance of recovery. It doesn’t have to provide them with the best care (as the expatriates may demand in order to relocate there). It just has to provide them with adequate care. Others would argue that if the medical care was so poor that employees were put at extraordinary risk compared to other local factories, then no one would work there, despite the higher wages.

Case Six: Layoffs In Saudi Arabia

You’re a British consultant sent to Saudi Arabia to have a look at a new joint venture your company has just taken a stake in—a family-run, light manufacturing firm with 400 employees. You look at the books and mention that you think the workforce is terribly bloated. Output and revenue per employee is below average. You suggest laying off up to 20 percent of the workforce. The Saudi owners look at you horrified, saying layoffs are downright unethical and there is more to business than maximizing profits. You are equally horrified.

EXPLANATION Most business in Arab societies—where the collectivist culture is dominant— place far greater value on the loyalty of employees than on the efficiency of employees, and are right to view layoffs as unethical. This notion is reinforced by the tenets of Islamic law, which are designed to stress the social obligations of a company, making profit maximization secondary. Indeed, to fire a loyal worker to maximize profits is indeed unethical behavior. When faced with this situation in real life, the British consultant and the Saudi owners came to an interesting solution: cut pay across the board and reduce worker’s hours. The workers understood. No one complained and many even thanked the owners for saving their jobs. The lesson learned: when dealing in a highly collectivized culture it may be wiser to trim the pay of all workers in a

downturn rather than lay off individuals. The workers themselves may actually want it that way. The case is an excellent example of how a different cultural mindset can bring forth creative solutions to universal business problems. Multinational corporations and expatriate managers should take notice.

Case Seven: The Female Work Colleague In a “Man’s World”

June Smith is traveling on an international sales trip with her colleague, Nigel, one of the company’s most experienced salesmen. The trip is successful, but when they get back, June complains about an incident that occurred on the trip. At the end of the final day, with the contract in hand, the customer proposed that Nigel join him at his men’s club to celebrate.

If you were Nigel’s boss you would have advised him to: A.Accept the invitation; don’t rock the boat. B.Propose an alternative venue so June could join them. C.Refuse the invitation.

D.Take a male partner next time.

EXPLANATION This is the type of incident that can and does occur with some regularity in certain venues, particularly in Japan and the Middle East, though the age of globalization has sensitized virtually all cultures to such an incident. Answer A (accept the invitation) is clearly not fair to your work colleague and may be against, if not the letter of company policy, most likely the spirit of it. In a world of globalization of business, her complaint is probably justified. However by choosing B or C, would June and Nigel be guilty of “cultural imperialism?” Some would argue that both the company and June should have been prepared for this kind of incident. “Preparation” might mean coping with the situation sensitively and diplomatically so that she and Nigel could shape events before an embarrassing situation arose. Answer C is simply rude in any culture—and risks alienating future business for no good reason. Others would argue that “preparation” entailed not sending June to countries where she would not be included—answer D. The culture of those countries is not

“wrong,” just different, and it is important for companies to minimize those differences. Companies need to be sensitive to the local culture. In fact, the very notion of a male-female sales team traveling together can be offensive in some cultures. Probably the best answer to this quandary would be B (propose an alternative venue where June could attend). Today, few customers would be offended by such a compromise. There is yet another view—namely, of how the incident may affect June’s career. Some experts would believe that it is unfair to exclude her from participation in social events if it impairs her business effectiveness and may cause her to lose future opportunities. Another view is that June should not complain if missing the celebration did not hurt her long-term career prospects. After all, wasn’t the real reason for the trip “to get the deal?”

Case Eight: Sexual Harassment

You are a middle manager in a large North American corporation. You are sitting in a tavern and strike up a conversation with a woman sitting next to you whom you recognize as an employee of the same company you work for. She mentions that her boss at work is sexually harassing her. You know who she works for and you are friends with her boss. What action do you take? A.Tell her you know her boss and she must be mistaken. B.Stay out of it. C.Begin your own investigation to determine the facts and perhaps clear her boss. D.Advise her to report the allegations to the human resources department and offer to go with her. E.Call human resources and the ethics office the next business day to report your conversation.

EXPLANATION The first two answers A and B are, of course, while the easy way out of the dilemma, a betrayal of your ethical responsibilities to your organization. Still, they are appealing and it is easy to see how they could be rationalized—after all, the conversation took place out of work hours and out of the office environment; so it really isn’t your duty to report it. In fact the first three answers (A, B, and C) could all lead to more serious trouble down the road, for you and your company.

While failing to report your suspicions could allow the situation to grow even worse than it is, conducting an unprofessional and botched investigation could increase your company’s potential liability exponentially. While D seems like a reasonable solution, it still probably does not go far enough. Only E covers all the ethical bases by fulfilling the manager’s ethical duty to the organization and its employees.

Case Nine: Competitive Intelligence

Your company is in a highly competitive bidding process (for a multi-million dollar contract) with your major rival. Your customer sends the final specifications in the mail and you discover the papers include the final offer sheet of your competitor. You are not sure if it was an accident or on purpose. What do you do? A.Throw it away without a glance. B.Review the document and adjust your company’s offer to beat it. C.Decide that it went out to all the other bidders as well, so everyone has the same information and will adjust their bids appropriately. D.Call your boss and the legal department and report the incident.

EXPLANATION In this case, there is only one correct answer—D. While A sounds very much like the right thing to do, the discovery of the information must be reported to superiors and the corporate legal department. Failure to do so might lead to serious consequences for your corporation. Obviously B is just downright unethical. There is no way to rationalize the action with any known ethical standard. C is simply an attempt to rationalize bad behavior.

Case Ten: The Computer Hardware Vendor

You run a small Internet business and need to purchase computer hardware for an upgrade and expansion. You know that your next venture is highly risky, will involve hiring expensive staff and runs the risk, if unsuccessful, of severely limiting your cash flow. Although the terms of the contract are 45 days payment, you don’t expect to be able to pay the vendor bill for at least six months, until the expansion is complete and the new project is up and running—and hopefully, making money. The vendor has done his due diligence and runs the usual credit checks. However none of the checks would reveal your secret and risky expansion plan. You decide to: A.Inform the vendor of your plans; there are other suppliers after all. B.Keep silent. C.Postpone the expansion until you can afford it out of current cash flow.

EXPLANATION In fact, all three answers to this question seem reasonable. Even though a “lie of omission” is still a lie, in this case, the vendor might find it hard to criticize the entrepreneur’s silence. There has been a change in business, particularly in the

West, away from the old CAVEAT EMPTOR (let the buyer beware) towards a CAVEAT VENDITOR (let the seller beware) attitude. The vendor is assumed to have a good degree of marketplace acumen and should realize that many firms “age their payables” beyond the normal 30-60-90 day process to protect their own cash flows. Answer B assumes such acumen as well as assuming that the buyer will eventually pay the bill—maybe even with interest penalties. While both A and C cover the ethical ground of not misleading the vendor, C is a very conservative (and potentially, a poor business decision) path to take in the highly competitive Internet business world. Answer A would seem to cover both the ethical and business issues effectively. Negotiating payment terms is part of business. The reputation for honesty is likely to mean more to the company’s bottom line in the long run than more favorable payment terms in the short run.