BUSINESS ETHICS IN ASIA

Transcription

1 BUSINESS ETHICS IN ASIA SEMBA September 2016 Dr Benny Tabalujan Associate Professor (Principal Fellow), MBS

2 Today s Session Reflections on business ethics in Asia (especially drawing from the Industry Studies in Asia subject & trip to China) Ethical frameworks? Case studies: Khoo Teck Puat in Singapore Wahaha Group & Danone in China 2

3 Reflections on business ethics in Asia How would you describe business ethics? Is business ethics in Asia different compared to what you ve experienced elsewhere? In what way? Any personal experiences or observations to share? What explanations can you offer to help our understanding of how business ethics operates in Asia, especially China? 3

4 Preliminary definitions Ethics: science or philosophy of morals. A framework through which a person decides what is right and wrong. Values: principles or standards which a person considers important in life. Values contribute to a person s ethical framework. Cross-cultural ethics: one person can view his/her action as ethical while another person (who has different values or a different ethical framework) sees the same action as unethical. Both are ethical. They disagree because of differing values or ethical frameworks often rooted in different cultures. 4

5 Ethical Frameworks Teleological frameworks Also called consequentialist theories. An action is morally right if the consequences of that action are more favourable than unfavourable Example: utilitarianism of Jeremy Bentham ( ) OUTCOMES Deontological frameworks Also called duty theories. Ethical behaviour is based on foundational principles of obligation Examples: the categorical imperative of Immanuel Kant ( ) RULES or PRINCIPLES Virtue frameworks (virtue ethics) Often traced back to Aristotle ( BC) Sees virtue or excellence of character as leading to virtuous acts which, in turn, leads to eudaimonia (human flourishing) CHARACTER 5

6 Asia: Confucian ethical framework Confucius (c BC) Key texts: Analects of Confucius and Works of Mencius Key question: How best to order society & relationships? Three key values: Filial piety Humaneness Ritual Five key relationships (according to Mencius BC): parent and child minister and ruler husband and wife older and younger brother friend and friend 6

7 Confucianism: Three key values Filial piety - respect for one s parents; ancestor worship; reciprocity Few of those who are filial sons and respectful brothers will show disrespect to superiors, and there has never been a man who is respectful to superiors and yet creates disorder. A superior man is devoted to the fundamental. When the root is firmly established, the moral law will grow. Filial piety and brotherly respect are the root of humanity. Analects I:2 7

8 Confucianism: Three key values Humaneness care for other human beings "...The humane man, desiring to be established himself, seeks to establish others; desiring himself to succeed, he helps others to succeed. To judge others by what one knows of oneself is the method of achieving humanity..." Analects VI:28 8

9 Confucianism: Three key values Ritual respect for doing things in a particular way; what is ritually proper; doing things with propriety "In rites at large, it is always better to be too simple rather than too lavish. In funeral rites, it is more important to have the real sentiment of sorrow than minute attention to observances. Analects III:4 "To try to order the people through laws and regulations and implicit punishments, if you do that, people will find a way to avoid, evade the law, and they will have no sense of shame. If you lead them by virtue and the rites, then they will govern themselves, discipline themselves, and they will have a sense of shame. Analects II:3 9

10 Confucianism in Asian business Law (external) v Inner virtue & ritual (internal) Form v Substance in business contracts Rule of law v Rule by righteous leaders Individual v Family & community Self interest v Communal interest Personal rights v Group harmony Profit v Fairness Individuals are equal v Hierarchy of persons Material purpose v Social purpose Rights v Responsibilities / Duties Profit v Learning This worldly v Ancestor-worldly 2012 video from Markkula Center for Applied Ethics, Santa Clara University: (Liu Baocheng, executive director of the Center for International Business Ethics, talks with Kirk O. Hanson, executive director of the Markkula Center) 10

11 China: the role of guanxi in business set of personal connections which an individual may draw upon to secure resources or advantage when doing business or in the course of social life (Davies, 1995) Guanxi seems to be the lifeblood of the Chinese business community and extends into politics and society. Without guanxi, one simply cannot get anything done On the other hand, with guanxi, anything seems possible. (Davies, Leung, et al, 2003) How does guanxi impact business in China? Is it accurate to say that Chinese (and Asian?) business generally is more "relational" than "transactional"? How does guanxi square off with Western business ethics? 11

12 Confucianism in practice? Case: Khoo Teck Puat ( ) Forbes 2004 Rich List Rank: 108 Net Worth: US$4.3 billion Residence: Singapore Marital Status: widowed, 14 children Singapore's former richest man died in February 2004 at age 87. The banker and hotel owner reportedly died from a heart attack. He is survived by 14 children. The bulk of his fortune came from shares in Standard Chartered Bank, which he bought in the 1980s to help thwart a hostile suitor. His Goodwood Park Hotel in Singapore, built in 1900, is a historic landmark. His 11.5% stake in StanChart was sold in 2006 by his beneficiaries to Temasek for a reputed S$4 billion. In 2007, his children donated S$125 million towards a new 590-bed hospital which opened in 2010 in Singapore. The hospital is now named the Khoo Teck Puat Hospital. 12

13 Khoo Teck Puat & his daughters Reflect on the news reports of what happened in What s the core issue here? What does this case suggest about the intersection of family fidelity, business ethics and corporate governance in the Asian context? What issues does this case raise for Westerners doing business with Asian family companies? 13

14 Another case: Zong Qinghou and the Wahaha Group Age: 71 (2016) Residence: Hangzhou, China Rank: 35 in Forbes 2015 Rich List, est wealth: US$10b. Rank: 1 in China, 2012 Hurun s China Rich List, est wealth: US$20b. Family status: married, with 1 child Delegate to China s National People s Congress Wahaha Group sales: around US$12b (2014) Began the Wahaha Group in 1987 distributing soft drinks, milk drinks, ice, stationery. Entered joint venture with Groupe Danone (France) in Danone JV broke up in

15 The Wahaha Danone JV 3-party JV formed in 1996 Danone (French), Bai Fu Qin (HK) invest via Jin Jia Investment Co. Ltd (Singapore), contributing 500M RMB, technology, expertise 51% Wahaha (CN) contributes Wahaha trademark, worth 100M RMB 49% Danone bought Bai Fu s share in 1998, gaining legal control of JV But Wahaha trademark was not successfully transferred to the JV only an abbreviated version of the trademark used via exclusive licensing agreement. This was actually not in accordance with the JV agreement. Acknowledgments: MBA syndicate group - Calvin An, Craig Mutton, Yuska Villani, Edmond Wong 15

16 Good times, bad times, resolution Danone had control over board (3/5), while Wahaha Group completely ran daily operations. The JV became the largest beverage/bottled water company in China, with 15% market share. From 2000, Wahaha began to create non-jv companies that sold Wahaha products. Danone found out only in 2005, and demanded to purchase 51% of these companies. Wahaha refused. Danone sued in After a series of lawsuits and failed arbitration attempts, in 2009 Danone decided to sell its entire 51% stake to Wahaha. Acknowledgments: MBA syndicate group - Calvin An, Craig Mutton, Yuska Villani, Edmond Wong 16

17 Business ethics what s the impact of culture? The car and pedestrian dilemma Source: Charles Hampden-Turner & Fons Trompenaars, Building Cross-Cultural Competence (Yale University Press, 2000) 16 17

18 Last words? Culture is the collective programming of the mind which distinguishes the members of one group from another. Culture is more often a source of conflict than of synergy. Cultural differences are a nuisance at best and often a disaster. Geert Hofstede, Emeritus Professor of Organisational Anthropology and International Management, Maastricht University. Author of two famous works on cross-cultural communication and management: Culture's Consequences (1980) and Cultures and Organizations: Software of the Mind (1991). 18