p.556

33

Cross-cultural management ethics in multinational commerce

Terence Jackson

Despite the fact that the foundations of extant cross-cultural management studies have been based on concepts of national values, little of the theory developed has been translated into an understanding of ethics across different cultures. Where the step from descriptive values to normative ethics has been taken, this is often in an uncritical way. Much of the foundation of cross-cultural management studies based on differences in values has been criticized over the last few years, with Geert Hofstede’s (1980a) seminal work receiving particular attention. Despite a number of studies that have sought to offer alternatives or updates to Hofstede’s now ageing study, there remain questions about the conceptual foundations of such an approach. The current chapter seeks to review the work in this area, discussing the relevance to a consideration of differences in ethicality, or an appreciation of what is ethical or not ethical across cultural contexts in multinational commerce, and to provide an appraisal of what is missing from a critical theory of management ethics across countries and the future of research in this area.

The current chapter seeks to make the transition from a purely descriptive account of cultural values, that suggests ethical issues in working across cultures, to a normative one that may guide ethical management across cultures. The chapter first focuses on cultural comparison studies (and their shortcomings), chiefly those by Hofstede (1980a; Hofstede etal. 2010). A second section examines studies that have built on Hofstede’s work, including the GLOBE study, as well as revisions to the work of Fons Trompenaars (1993). The third section takes up the World Values Survey and examines the role of modernization theory that appears to implicitly inform this and the other comparative studies. Each professes to be descriptive yet hides value judgments that appear to favor some values (such as individualism) over other values (such as collectivism). The last section of the chapter focuses on theories that seek to advise or assist those who manage across cultural contexts when faced with conflicting cultural values.

Foundations: Hofstede’s cultural values approach in international management studies

In his cultural values approach to comparing nations, Geert Hofstede (1980a) made a significant contribution to international management studies. His early work has attracted a number of studies based on his theories, replications (Hofstede 1980a) and conceptual and empirical updates (Hofstede etal. 2010). He provided a critique of the universal nature of management knowledge, policies and practices. Hofstede (1980b) questioned whether American management practices, such as participative management, are appropriate in countries that have cultural values that are distinct from those of the Anglo-American cultures. In doing so, he opened the possibility of critically examining aspects of management values, such as what is regarded as ethical or not across different national environments. From the point of view of businesses and organizations operating across national borders, it is important for managers to understand the meaning of ethicality (what is regarded as ethical) in different cultural contexts.

p.557

Yet Hofstede’s work itself is limited in this aspect in two different ways. First, he did not go on to examine ethics specifically, refraining from taking the jump from cultural values to cross-cultural ethics, although it could be argued that he offered the basis for such an analysis. Second, work that simply compares nations on the basis of value differences remains purely descriptive and lacks a basis for managers and staff to make a judgment about what they should do. So, it is limited in its utility to managers working across cultural contexts, even as it forces this question: what should managers do when there are ethical differences between the home country and the host country, as based on the cultural values that Hofstede is describing?

Conceptually Hofstede’s work is rooted in the positivist paradigm. Although other studies have continued in this tradition (Trompenaars 1993; Smith etal. 1996; House etal. 2004, 2014; Trompenaars and Hampden-Turner 2012), there are additional analyses, typically undertaken outside management studies, that have related more generally to wider societal values rather than organisational and management values (Inglehart etal. 1998; Basanez 2016; Schwartz 1999; Fischer etal. 2010). These works discuss values in management and organization and they tend to represent values at different macro, meso, or micro levels. Jackson (2002) pointed out that Shalom H. Schwartz’s (1994) data on the former West and East Germanys indicate similarities of wider societal values, suggesting that the prevailing cultural values of the two Germanys were more similar and pervasive during the Iron Curtain years than is suggested by data from studies of organizational employees and managers (such as Trompenaars 1993), that appear to point to differences in management values only.

In the case of former soviet and former colonial countries some work organizations fail to reflect the wider values of the societies within which they exist (Jackson 2004). Yet, there are also connections between organizational values and societal values. Hence such studies of wider societal values can be used to indicate the degree of fit with organizational values.

Understanding the values of the wider (macro) society within which organizations evolve or are imposed is important. First, Western countries such as Britain, France and the USA do business abroad with a set of cultural values that often are not manifest or explicit but are assumed to be universal (Jackson 2011a). This has been one of the major critical purposes of cross-cultural studies: to question whether management practices used in the home country are appropriate in other countries. It is important to understand the values from which management systems, or sets of policies and implicit rules used in organizations, are derived, and how they influence the way organizations are managed in other countries.

From values to ethics

Geert Hofstede (originally in 1980a, later revised in 2003) was one of the first to attempt to develop a universal framework for understanding cultural differences in managers’ and employees’ values based on a world-wide survey within the company that employed him at the time: IBM. Hofstede’s work focuses on “value systems” of national cultures that were originally represented by four dimensions, discussed below. His descriptions of value dimensions are suggestive of differences in ethicality across cultural contexts.

p.558

Power distance

This is the extent to which inequalities among people are perceived as normal. This dimension stretches from equal relations being seen as normal to wide inequalities being viewed as normal. According to Hofstede, power distance is polarized into small and large power distance and comprises attitudes that people within the culture have about the acceptable inequalities between people in the society or organization.

Power distance offers some explanation for the justification of autocratic management styles and high hierarchies in organizations as well as inequalities of wealth in the wider society. For example, in large power distant cultures, differences in rank or authority are expected and viewed as right and proper.

Yet, from a critical perspective, in terms of considering differences in ethicality, this value dimension, which is presented as descriptive, has certain issues. The first could be viewed as an implied Western-centric value judgment that low power distance is to be preferred over high power distance. Thus, democracy is to be preferred over autocracy, participatory management over autocratic non-participative management. This perspective could be applied over all Hofstede’s and others’ conceptualization of national value judgments, and could be seen as accompanying a modernization ethos within international management studies where the Western model of industrialization and modernization is valued, implicitly or explicitly. This perspective is also assumed in the World Values Survey literature (e.g., Inglehart 1997), discussed below.

A second problem, which could be seen as the other side of the coin, is that of a lack of normative perspective in a theory that concerns values. If we are guided by Hofstede’s description that Belgium is higher in power distance than the Netherlands, what do managers from the Netherlands do when they go to manage a company in Belgium? This question might seem contradictory to the assertion above of an implied value judgment (that low power distance is best), but it is not: the implied judgment rests tacitly within the theory but the question reflects the sort of concern that the manager might entertain. It is necessary to turn to other bodies of theory to understand these two issues. For the first problem outlined above we need to turn to critical theory such as postcolonial theory, and for the second problem we need to turn to theories of ethical relativism and its alternatives. These will be revisited later.

Uncertainty avoidance

This refers to a preference for structured situations versus unstructured situations. This dimension runs from being comfortable with flexibility and ambiguity to a need for extreme rigidity and situations with a high degree of certainty. Weak uncertainty avoidance cultures, according to Hofstede, accept uncertainty as a feature of everyday life, there is generally low stress and people feel comfortable in ambiguous situations. Strong uncertainty avoidance is characterized by the threat of uncertainty that is always present but must be fought. It is characterized by high stress and a fear of ambiguous situations and unfamiliar risk.

This value dimension appears to have implications for the ethicality of imposing fixed and rigid rules in a workplace as opposed to flexibility and room for individual expression. Again, there may be a Western-centric implication that the latter is to be preferred. Management textbooks appear to be written from the implicit assumption that staff are able to cope with higher levels of ambiguity as the following example seeks to illustrate.

p.559

The process of “change management,” as featured in Western management textbooks, assumes a need to openly communicate and discuss the change throughout hierarchical levels, to get staff to take ownership of the change, to make suggestions, to be involved from start to finish in the change process. Yet Jackson (2011a) has pointed out that although this may work well in a low power distance and low uncertainty avoidance cultural context, this may be quite inappropriate in a high power distance context (“you are the boss, why aren’t you managing?”) and a high uncertainty avoidance context. Change is a highly uncertain process, making staff uneasy even in a low uncertainty avoidance context. By treating the process in a way that places responsibility on staff creates more uncertainty in a high uncertainty avoidance context and may be entirely inappropriate.

The concept of appropriateness is a very important concept in cross-cultural management theory (Jackson 2011b). It implies issues of ethicality, yet rarely within this field of theory is this connection made explicitly. Is it appropriate for managers to adopt a more democratic style of managing in a high power distance culture, or should they adopt a more autocratic style? Is it right or wrong? These are issues of appropriateness that Hofstede (1980b) touched on in his landmark article that examined whether American management principles can be applied abroad, but he never explored the ethical implications. Once one starts to ask if something is right or wrong, then the territory of normative ethics is entered. Once one moves across different cultural contexts in international management and multinational commerce, the question of right and wrong becomes more complex and, for scholars, more interesting.

Collectivism–individualism

The polarity of collective and individual looks at whether individuals are accustomed to acting as individuals or as part of cohesive groups, perhaps based on the family (which is more the case with Chinese societies) or the corporation (as may be the case in Japan).

As with low uncertainty avoidance and low power distance, individualism could be seen as implied as the Western-centric norm. To give an example, the area of conduct that Western observers call nepotism illustrates what Western managers often encounter in Eastern countries (if one can forgive the wide generalization in this statement). The nepotism may include, let us say, Chinese or Nigerian managers who recruit staff based on whom they know (rather than from a stock of applicants arising from advertisements placed in local newspapers who have been interviewed and perhaps vetted through various assessment centres), but the Western manager will frown upon practices such as these. However, from the Nigerian manager’s perspective, it is inept to recruit a complete stranger whom one does not know, and with whom one has no mutual obligation, whose family and background is unknown. How much better to recruit someone from the same in-group (village, community, family) where there are mutual obligations existing, where pressure can be exerted if they do not perform, whose family can be approached to pull them back into line. From the perspective of the Chinese manager—already facing difficulties in recruiting good Chinese staff for a foreign private company because the best are retained by state-owned enterprises—it is impractical to look for staff on the open market. One has to go through personal networks (guanxi), for otherwise the company will end up with employees who cannot get a job anywhere else.

Hence “nepotism,” which is seen as unethical in Western countries, may be seen as good practice and common sense in many non-Western countries. A concept of collectivism– individualism helps us to understand this, if thought through logically, yet is not without its issues, particularly from a Western perspective. In-group favoritism can be a problem even where this may be seen as common sense in, for example, an African country where many companies can be dominated by a particular cultural/ethnic/linguistic group (Jackson 2004).

p.560

Masculinity–femininity

Hofstede distinguishes “hard values” such as assertiveness and competition, and the “soft” or “feminine” values of personal relations, quality of life and caring about others. In a masculine society gender role differentiation is emphasized.

There appears to be two aspects of Hofstede’s dimension. The first concerns the prominence of “feminine” values across the genders, as opposed to the differentiation between male values and female values in countries that score high on masculinity. The latter leads to the second aspect, which is the dominance of males in, for example, managerial jobs (e.g., Japan) and a lack of equality between male and female. The distinct values of femininity and masculinity offer justification for gender inequalities, but may also be connected with the levels of achievement orientation in society, including the centrality of work outside the home and the work-life balance, with its implications for levels of women in the workforce, childcare provision, and imposition of corporations on the wider life-space of individuals. Not only do the values of femininity and masculinity bear implications for the perceived ethicality of gender inequality but they also suggest a cultural justification for workplace discrimination. This aside, there still appears to be an implied Western-centric value judgment that masculinity may be the preferred pole of the dimension with links being made from assertiveness to competition, achievement societies and successful economies, with Hofstede (1991) himself linking his masculinity pole with high achievement motivation societies, as noted in David C. McClelland’s studies (1961/1987). This association is also reflected in the international proliferation through management education and by multinational enterprises of results-oriented human resource management systems that connect pay and promotion directly to results (Sparrow etal. 2017).

Adding a fifth dimension: Confucian dynamism

To his original four dimensions Hofstede added a fifth, which was developed through the Chinese Cultural Connection study (CCC 1987) and justified, in part, by Hofstede’s warning of the dangers of developing constructs from a Western point of view. The Chinese Cultural Connection was an attempt to counter this by introducing an Eastern perspective and values. Nonetheless, the study reinforced three out of the four dimensions in Hofstede’s original study: the Chinese dimension of “human-heartedness,” which incorporates values such as kindness, courtesy and social consciousness, correlates negatively with masculinity; “integration,” which encompasses the cultivation of trust, tolerance and friendship, correlates negatively with power distance; “moral discipline,” including values of group responsiveness, moderation, adaptability and prudent behavior, correlates negatively with individualism.

None of the new dimensions correlated with uncertainty avoidance, but a new dimension was added, termed Confucian dynamism and then long term orientation, with values of persistence and perseverance, ordering relationships by status and observing order, thrift and having a sense of shame. Uncertainty avoidance is concerned with absolute truth, which may not be a relevant value in Chinese society and other Eastern cultures that are more concerned with virtue. Of particular relevance is the virtue of working hard and acquiring skills and traits such as thrift, patience and perseverance, all values connected with this fifth dimension that may replace uncertainty avoidance as a relevant Eastern concept. Truth and the value of truth is an important concept in Western ethics. The value of this fifth dimension is that it points to the culturally relative nature of truth, particularly in the account above of the importance of virtue, and maintaining “face” rather than a belief in any absolute truth. Western-centric implicit assumptions also appear not to be present to the same extent as the other four dimensions, with a deliberate attempt on Hofstede’s part in being Eastern-centric.

p.561

Building on Hofstede’s foundations

The GLOBE study

The main successor to Hofstede’s study is GLOBE (Global Leadership and Organizational Behavior Effectiveness Research Program), a more recent cross-national study undertaken by Robert House and a team of 170 researchers across 62 societies (House etal. 2004; House etal. 2014). The GLOBE project findings reflect many of the cultural dimensions proffered in earlier studies, and, as such, do not add conceptually to a descriptive understanding of ethical values across cultures. These findings do, however, provide more current information that is perhaps more rigorously validated, covers more countries than previous studies did, and distinguish between “values” (what should be) and “practices” (what is seen to be done). For example, the GLOBE study covers some six African countries and six post-soviet countries. Many of the dimensions correlate with Hofstede’s dimensions.

The main value of the GLOBE study appears to be in updating Hofstede’s empirical base and providing more current descriptive information on values held in organizations. In terms of future research comparing national values to ethical beliefs and practices, scholars would benefit from referring to this more recent study.

Trompenaars reanalyzed

The other study that is often cited in the cross-cultural management literature (although little work directly links this to an analysis of ethics across cultural contexts) is that of Fons Trompenaars (Trompenaars 1993; Trompenaars and Hampden Turner 2012). Although this study has severe methodological issues and lacks academic rigour, it does have relevance to an understanding of ethics in multinational commerce, but only in the form of the data’s rigorous reanalysis by Peter Smith, Shaun Dugan, and Fons Trompenaars (1996).

The original work identified the following value dimensions: regard for rules or relations (universalism–particularism), individualism–collectivism, neutral–affective expression of emotions, low and high context societies (specific–diffuse) and the way status is accorded (achievement–ascription). Smith, Dugan and Trompenaars (1996) performed a statistical reanalysis through multidimensional scaling of Trompenaars’ extensive international database. This reanalysis provided two major cultural value dimensions: conservatism–egalitarianism and utilitarian involvement–loyal involvement. Conservatism comprises items that represent ascribed status, particularist/paternalistic employers and formalized hierarchies, and represents an external locus of control. It correlates with Hofstede’s collectivism and power distance. Egalitarian commitment comprises achieved status, universalistic and non-paternalistic values, as well as functional hierarchy and internal locus of control, and correlates with Hofstede’s individualism and low power distance. Utilitarian involvement comprises aspects of individualism that emphasize individual credit and responsibility. It correlates with Hofstede’s individualism and low power distance. Loyal involvement comprises aspects of collectivism that stress loyalty and obligation to the group, as well as corporate loyalty and obligation. It correlates with Hofstede’s collectivism and high power distance.

Incorporated within the conservatism–egalitarian commitment, Trompenaars’ (1993) dimensions of universalism–particularism, achievement–ascription and locus of control are the most relevant to a discussion of ethics across cultural contexts, and provide more refinement to the ethical implications of Hofstede’s dimensions. In some cultural contexts people see rules and regulations as applying universally to everyone, regardless of who they are. In cultures that are more particularist, people see relationships as more important than applying rules the same way for everyone. There is an inclination to apply the rules according to friendship and kinship relations. This tendency has implications for recruitment and promotion policies in organizations in, for example, some Asian countries, whose policies may be at variance with practices in countries such as the United States and Britain where, as discussed above, such practices might be deemed to exemplify “nepotism,” and be regarded as ethically suspect. However, there are differences in European countries. Greece, Spain and France are seen as more particularist, and Sweden, former West Germany and Britain as more universalist.

p.562

Also within the conservatism–egalitarian commitment construct is Trompenaars’ concept of achievement–ascription. Status is accorded to people on the basis of what they accomplish in their jobs and their lives (achievement) or, alternatively, on the basis of who they are and where they come from, such as family background, school, or some other prior factor (ascription). Quite often more traditional societies attribute status according to ascription. Again, this may influence recruitment and promotion policies that may be at variance to practices in some (but not all) Western cultures, and again may raise ethical issues. On some measures Austria, Belgium, Spain and Italy are more ascription oriented, and Denmark, Britain and Sweden more achievement oriented.

Locus of control is another concept that is subsumed within the conservatism–egalitarian commitment construct. People tend to believe that what happens to them in life is their own doing (internal locus of control), or they have no or little control over what happens to them (external locus of control), the causes of which are external to them. Locus of control raises issues about how people relate to their environment, and the level of control they believe they have over the natural world. This may have implications for the nature of interaction with the natural and social world, and raises ethical questions about power (in the social sphere) and environment controls (in the natural sphere). It also may have implications for the nature of management control in organizations. For example, setting targets may be inappropriate as a form of management control in a society that culturally has an external locus of control.

Paternalism is also an important concept in cross-cultural management research and is captured in part by Trompenaars’ concept of specific–diffuse, which contains questionnaire items such as “should the company provide housing.” The specific–diffuse dimension—which involves the extent to which relationships at work, particularly with the boss, are carried through to other aspects of one’s life—is subsumed within the construct of conservatism, and may have ethical implications for the regard for interference/protection in one’s life by the corporation. Paternalism is a construct that is often seen as negative from a Western-centric perspective. Yet Zeynep Aycan (2006) has done much to disabuse this image, seeing paternalism as protection of those under the patronage of a caring boss.

The dimension of utilitarian involvement–loyal involvement (Smith etal. 1996), though allied to Hofstede’s individual–collectivism and power distance, also reflects the nature of loyalty of the individual to the group and corporation. Individuals may have a contractual relationship with the organization within the utilitarian involvement construct, yet members of a group or corporation also have relations with the wider collective that involve obligation and reciprocity. Such obligation and reciprocity may reflect the extent to which loyalty issues are regarded ethically. For example, whistleblowing may be regarded quite differently by societies whose culture is at two different poles of this dimension. A lack of loyalty (as well as what constitutes loyalty) may be an ethical issue in a society that reflects more the loyal involvement side of the pole.

p.563

What each of the GLOBE and Hofstede’s theory lacks is any comparison with wider societal values. Yet the World Values Survey (WVS), or at least its interpretation, appears to explicitly accept the “modernization project”—the notion that societal progress inevitably will, and should, follow a Western model of development in the industrial and postindustrial eras.

World Values Survey and modernization theory

Modernization theory makes assumptions of societal progress. Management studies as a subject area appears often implicitly to support this worldview. As this author has noted in a recent article, “‘Autocracy is better than democracy.’ How many cross-cultural management scholars would agree with this? Yet why should democracy be an aim of modern societies? Are there not other routes to societal development?” (Jackson 2015: 131). A salient illustration of the tacit assumption of modernization is provided in one article on women in leadership positions in the Arab Gulf countries: “Many countries and regions around the world have made progress in past decades in terms of women holding senior management positions.” The authors add, “although progress has been made, women are still underrepresented in senior positions particularly within business across the world” (Kemp etal. 2015: 216, emphasis added).

Hofstede, as noted above, has been taken to task about the value judgments his cultural dimensions seem to engender (Human 1996) as being far from dispassionate descriptors. Indeed, Hofstede (1980a) showed a 0.82 correlation between individualism and economic development, although Çiğdem Kağıtçibaşi (1997) noted a challenge to this by the rapid industrialization of collectivist Asian countries. This challenge may go far deeper today with developments in the Chinese economy. The development path of China has certainly been different from that of Western economies, with what many Western commentators would see as a subjugation of individual human rights (Jackson 2011a). Critical theory should challenge these underlying assumptions as these have fundamental implications for what is seen as ethical. Hence if Western-style democracy is seen as a goal to aim for in “developing” countries, those systems of government that are seen as non-democratic may be perceived as acting less ethically towards their citizens.

Yet if the assumptions of modernization are implicit in Hofstede’s work, they are quite explicit in Ronald Inglehart’s own interpretation of his data from the WVS.

The World Values Survey data show us that the world views of people of rich societies differ systematically from those of low-income societies across a wide range of political, social, and religious norms and beliefs. The two most significant dimensions that emerge reflected, first, a polarization between traditional and secular-rational orientations towards authority and, second, a polarization between survival and self-expression values. By traditional we mean those societies that are relatively authoritarian, place strong emphasis on religion, and exhibit a mainstream version of preindustrial values such as an emphasis on male dominance in economic and political life, respect for authority, and relatively low levels of tolerance for abortion and divorce. Advanced societies, or secular-rational, tend to have the opposite characteristics.

A central component of the survival vs. self-expression dimension involves the polarization between materialist and postmaterialist values. Massive evidence indicates that cultural shift throughout advanced industrial society is emerging among generations who have grown up taking survival for granted. Values among this group [self-expression, for example] emphasize environmental protection, the women’s movement, and rising demand for participation in decision making in economic and political life. During the past 25 years, these values have become increasingly widespread in almost all advanced industrial societies for which extensive time-series evidence is available.

p.564

(Inglehart and Baker 2000: 16–17)

When linking such cultural dimensions to measures of economic development and prosperity, as indeed, for example, Hofstede (1980a) and Ingelhart (1997) do, there does appear to be a value judgment in terms of a correlation between economic and social development and cultural values that can lead to judgments of ethicality: one society being less ethical than another. Hence, developed countries are individualistic, low in power distance, and high on self-expression. Developing countries are seen as not living up to these values and suffer from in-group favoritism, or nepotism, autocracy and low regard for environmental protection and individual rights. Inglehart’s studies are longitudinal. This is their advantage, and also their disadvantage, as Inglehart appears to surmise from this that less industrialized societies are gradually catching up with industrialized societies and moving towards modernization; yet industrialized societies are now moving to postmodernization, so less industrialized societies have even further to go in following the path of the more advanced countries. In addition, the move towards greater “individual autonomy” appears to reflect a shift towards more individuality and away from collectivism and communalism. Inglehart sees modernization as emphasizing economic efficiency, bureaucratic authority and scientific rationality; and the move towards postmodernization as moving towards “a more human society with more room for individual autonomy, diversity and self expression” (Inglehart 1997:12).

One of Inglehart’s main collaborators, Miguel Basáñez (2016), reflects this view twenty years on when he derives three main “cultures” from the WVS data. Cultures of honor that emphasize political authority; cultures of achievement priotizing economic advancement; and cultures of joy that focus on social interactions. He asserts that these cultures evolve chronologically and mirror the development of agrarian, industrial and service societies.

Such judgments about what ought to be are within the realms of ethical theory, but in the case of Inglehart’s and Basáñez’s interpretations of the WVS data this is not explicit. It is not within the scope of this chapter to recount in detail this interpretation, but to mention some of the ethical implications coming out of this study.

It can be seen therefore that studies involving cultural value dimensions have implications for the way ethicality is perceived in different cultural contexts, yet authors of these studies have generally not drawn these conclusions. A more critical reading of these studies also suggests that there are implicit value assumptions within these studies, which generally are not openly stated or incorporated in, or controlled for, within the studies. Hence, modernization theory appears implicit within these studies, and is made most apparent in Inglehart’s interpretation of the WVS data. If it is assumed that the aim of so-called developing economies is to develop towards the modern economies of the West, and then towards the post-modern advanced economies of what many Western economies have become, then this assumption has serious ethical implications when such developing economies do not develop in this way, or do not in fact follow this developmental path. Susanne Schech and Jane Haggis (2000: 161), for example, demonstrate through documentary and press evidence the contrasting perceptions of human rights between the United States and China. Perceptions from the USA see China as infringing individual human rights by cracking down on political dissent and controlling the number of children couples have; while the perception from China is that the United States abuses the human rights of the poor and blacks, have a huge prison population, low voter turn outs and massive inequalities of wealth. The path to development of China has been quite different from that of the United States.

p.565

Yet, despite these implicit assumptions, studies remain descriptive instead of openly dealing with or taking advantage of what Bent Flyvbjerg (2001: 167) has described as the main strength of the social sciences: an ability to deal with what ought to be. He contends that: “the purpose of social science is not to develop theory, but to contribute to society’s practical rationality in elucidating where we are, where we want to go, and what is desirable according to diverse sets of values and interests.” The positivist paradigm, which underpins the cultural comparative studies outlined above, prevents these issues being addressed. However, these are exactly the issues that have to be addressed on a day-to-day basis by managers involved in multinational commerce, and who have to manage within international and cross-cultural contexts.

Ethical judgments, algorithms, and codes of ethics

Studies such as Hofstede’s and the others considered in this chapter provide an explanation of why ideas of ethicality may differ across the globe. Power distance, for example, may explain why inequality is seen as right and proper in one society and deplored in another. Value judgments about what is right or fair are made, at least in part, from our cultural perspective: the way we have been brought up, socialized, educated. Yet culture is more complex than four or five dimensions representing the collective values of some 50 nations, where socialization may be quite different within a society among different socio-ethnic groups and by class or socio-economic groupings. The critical cross-cultural literature on these issues appears to be lacking.

Making ethical judgments

The weakness of cultural values studies is their descriptive nature. They do not offer guidance on what to do. For example, consider a manager from a low power distance country who goes to a high power distance country: in terms of adapting to the high power distance culture or trying to encourage a more democratic working, how is this manager to make ethical judgments? To answer this we have to look elsewhere in the literature where the basis for ethical judgments seems logically to fit into two broad perspectives:

judgments based on consequential considerations (teleology); and,

judgments based on non-consequential considerations (deontology).

Consequential judgments are based on the expectation that an action, policy, or rule will, if generally enacted, have a result that on balance is good for the majority of persons or stakeholders (as in utilitarianism), or in the overall interests of the person making the decision or those with whom he or she identifies, such as the company (as in egoism). Non-consequential judgments are based on prior considerations of an explicit or implicit set of rules or principles whose rightness seems inherent to the rule or principle (assumed to be universal) and not derivative of anticipated results or effects (deontology).

However, it is unlikely that the bases for these different types of judgment are “pure” (Hunt and Vitell 1986) or that we rely solely on one to the exclusion of the other (Brady 1990) to make an ethical judgment. Hence, we may make a judgment on prior considerations of what we believe to be “fair” to all concerned (justice). However, ideas of fairness may be based on perceptions of the outcome of a decision providing to each the greatest amount of liberty which is compatible with a like liberty for all, but these may also imply judgments of the extent to which such rewards and opportunities should be distributed unequally (Rawls 1971), or as in Hofstede’s (1980a/2003) concept of power distance. We may also make ethical judgments based on what we believe is acceptable to us as a member of a family, to other groups which influence us, and as a member of a cultural group or society (ethical relativism).

p.566

It is also unlikely that these principles are invariable across cultures, and across different contexts. In a sense, ethical relativism is the only theory that addresses this issue, if not by explaining or justifying it, but simply by acknowledging it.

Although the cross-cultural literature focuses more on the content of ethical decisions, there is some evidence that the way judgments are made may vary among different cultural groups, although this has mainly focused on differences between Asian and non-Asian cultures. David A. Ralston etal. (1994), for example, discussed differences between the seemingly self-serving attitudes of Hong Kong Chinese managers compared with American managers, which may be explained by differences in the Western view of ethical behavior as an absolute that applies universally, and is in line with Hofstede’s fifth dimension of Confucian dynamism and the difference between truth and virtue discussed above. In the East “face” is important and ethical behavior depends on the situation. This situationalism was also seen in M. M. Dolecheck and C. C. Dolecheck’s (1987) study, which found that Hong Kong managers equate ethics to acting within the law, compared with American managers who see ethics as going beyond keeping to the letter of the law. Anusorn Singhapakdi etal. (1994) also found that Thai managers rely more on the nature of the ethical issue or circumstance and less on universal moral principles when making ethical judgments, at least as compared with their American counterparts. This conclusion may provide some (though not conclusive) support for assuming that Asian ethical judgment may be more relativistic in structure, and that the way judgments are made may vary from one situation to the other. Ethical judgments of Western managers may be based more on the application of universal principles of ethical behavior.

More specifically, a study by Gael McDonald and Patrick Pak (1997) set out to investigate cross-cultural differences in “cognitive philosophies” among managers from Hong Kong, Malaysia, New Zealand and Canada. Their findings suggested that self-interest is important in ethical decision making for Hong Kong managers, but that “duty” (a deontological consideration) is important to all these national groups. Justice, or considerations of fairness, is also important to all national groups. Utilitarian considerations are shown to be less important, but more important relatively for the Malaysian group. This study, as others that focus on the way ethical judgments are made (Reidenbach and Robin 1988, 1990), indicated that judgments are made using multiple criteria rather than relying on one specific basis of ethical decision making. It is the combination of multiple criteria that constitutes the way in which ethical judgments are made.

Specific studies of management ethics in Japan suggest that Japanese managers’ ethical decisions tend to be situational (Nakano 1997), although the development of Japanese “moralogy” (Taka and Dunfee 1997) may be indicative of a deontological emphasis in ethical decision making. American managers may look to industrial norms and what their company expects when making an ethical decision (Posner and Schmidt 1987). Although this runs counter-intuitively to the perceptions of the USA as an achievement-oriented society, this apparent deontological orientation may be the basis of the rise of codes of ethics among US corporations, and their spread by US multi-national enterprises across the globe. We discuss research below that runs contrary to this finding.

Consequential considerations of organizational efficiency figured lower for American than for Australian and Hong Kong managers in a comparative study of organizational values by Robert Westwood and Barry Posner (1997). In this study organizational stability was seen as significantly more important by the American than by the Australian and Hong Kong managers. A comparative study by D. S. Elenkov (1997) of managers in the United States and Russia suggested that Russian managers display higher levels of Machiavellianism than those in the United States, as well as being as competitively oriented as the American group and equally non-dogmatic. This may indicate a tendency to employ self-seeking criteria in ethical decision making, or at least employing utilitarian criteria among Russian managers.

p.567

However, George Neimanis (1997) suggested the Soviet system militated against people making their own decisions, but had the effect of justifying the interests of the state, the corporation, or the party as superseding any ethical considerations. This may have encouraged an egoism based on the best interests of the corporation, and more latterly based on self-interest with a move towards a free market economy (see also Apressyan 1997). However, it may also have encouraged a reference to rules and principles in order to avoid the consequences (punishment) of making a wrong decision. Principle-based decision making of managers and negotiators in the former Soviet Union is well documented (see, for example, Glenn etal. 1977, in relation to negotiation style), and the more recent Russian (and other post-Soviet countries) ethical judgment structure may be a complex of historical and current influences (Apressyan 1997).

Jackson etal. (2000) set out to study these possible differences in the way ethical judgments are made using the Reidenbach-Robin multidimensional scale (Reidenbach and Robin 1988, 1990). It provides an instrument that is purported to measure the ethical decision-making process by anchoring items to ethical philosophies, namely: justice, relativism, egoism, utilitarianism, deontology (Reidenbach and Robin 1990). Jackson etal.’s (2000) study focused on internal stakeholders, concerning corporate loyalty to employees, loyalty to company and loyalty to one’s group, and uses three vignettes to represent each of these aspects. The study included managers in the Anglo-Saxon countries of the United States and Australia; the East Asian “tiger” countries of Japan, Korea and the economic region of Hong Kong; and managers in the “transitional” countries of Russia (albeit in the Asiatic region) and Poland, and drew the following conclusions. Managers from the “Anglo-Saxon” countries seem to look more to the consequences of their decisions in order to judge whether a decision is ethical, while managers from East Asian countries employ a social referencing to guide their judgments, and Russian managers employ more principled or deontological considerations. Although all groups tend to use multiple criteria, the study indicates differences in emphasis among different cultures or countries.

This different emphasis on different decision criteria among managers from different cultures has implications for the way organizations attempt to influence the ethical decision-making of its managers. There is little direct relevance of employee codes of ethics if managers are employing predominantly consequential criteria, as in the case of the managers from Anglo-Saxon countries. This may be more directly pertinent to managers in Russia to whom deontological considerations are more relevant. Intervention in group processes may be more applicable to East Asian managers, and to a certain extent to Australian managers who employ socially referenced criteria alongside consequential considerations. For those managers such as the Americans, who employ predominantly consequential considerations (contrary to Posner and Schmidt’s 1987 findings above), discussion groups within organizations (which address the issues of the consequences of management decisions) may be more applicable in guiding ethical choice than managerial decision alone.

Decision algorithms

Although the way ethical judgments are made may differ across cultural contexts, this still does not provide guidance to international managers making decisions across these different contexts. Decision algorithms provide a means of making judgments that transcend either applying a cultural relativist position, or simply imposing inappropriate judgments from the home country of an MNE onto a host country organization and staff. A classic view of this is presented by Thomas Donaldson (1989: 16) who suggests that the idea of cultural relativism in ethical decision-making is common (perhaps more common in practice than in conceptualization). As Donaldson reports, the idea goes something like this. All cultures are different and no culture is any better or worse than any other, they are simply different. It is therefore correct to accept a culture, and its values, for what they are, and not to be judgmental. Therefore, if the value system within one culture allows for corporate bribery, then this should be acceptable. Donaldson (1989) believes this position to be untenable, suggesting that people mistakenly endorse cultural relativism, confusing it with cultural tolerance.

p.568

Hence, although Donaldson (1989: 104) rejects the international arena as a moral free-for-all, neither does he accept that moral values from one country such as the United States can be applied in another country. This tension makes it difficult to establish a universal moral objectivity applicable throughout the world. Donaldson’s solution is to propose an “ethical algorithm” to be used as a guideline in answering the question, “Is the practice permissible for the multinational company when it is morally and/or legally permitted in the host country, but not in the home country?” He first identifies two types of conflict.

The former occurs when the host country’s view is related to the level of its economic development. For example, this may be the case where regulations relating to levels of pollution may be more lax. The resolution of the conflict is then based on the principle that the practice is permissible if under similar economic circumstances the home country would regard the practice as permissible. Type 2 conflicts occur when the host country’s view is independent of its economic level of development. Whether or not nepotism is a useful example may be questioned in view of the discussions above in relation to cultural values and the relationship to collectivism and modernization assumptions. Similarly, bribery may provide another example in this context.

In Donaldson’s algorithm the question must be asked: Is it possible to conduct business successfully in the host country without undertaking this particular practice? If the answer is no, the next question is: Is the practice a clear violation of fundamental international human rights? If the answer is no, then if the practice is necessary to conduct business in the host country and it does not violate fundamental human rights, but if it does go against basic moral principles of the home country, then managers in the multinational corporation should speak against it.

However, in a cross-cultural context this approach may now be regarded as simplistic, but for managers working across countries, where companies have tended to rely almost exclusively on codes of ethical conduct to which managers are expected to adhere, following such an algorithm may run contrary to following one’s company’s code of ethics. Yet findings presented by Jackson (2000) from a study across six countries suggest that corporate policy has little influence on managers’ ethical attitudes and decision-making, with little variation across the countries studied, and that codes of ethics may be useful only as policy statements for external stakeholders, to enable corporations to comply with legislation, and probably only in countries such as the UK and USA that have less regulated economies. The study found that ethical attitudes and behaviors of peers were far more important than trying to legislate for ethical behavior.

p.569

Implications for managers working in multinational commerce

It is evident from this study that far more should be done by corporations for their managers working across international boundaries. Jackson has recommended that the following measures be taken in companies.

Peer discussion groups to address issues such as pilfering, taking gifts and reporting others’ violations of company policies, in order to gain some consensus and to make explicit commonly held views in these areas, particularly bearing in mind that attitudes and behaviors may differ among national cultures;

Regular or ad hoc stakeholders’ discussion groups including suppliers and key customers as well as internal stakeholders including top managers, and home-country and host-country managers, to gain valuable input and to take ownership of output;

Appropriate information and decision making systems which facilitate decision making in line with the output of discussion groups;

Training for managers in necessary ethical decision making competences including sensitivity to cross-cultural differences in these areas.

(Jackson 2000: 367–8)

Concluding remarks

From the above discussion it is apparent that there are data from extensive cross-border studies of values dimensions that may be useful for understanding the nature of ethicality and its interpretation in different cultural contexts. Yet there are weaknesses that prevent these studies being used for this purpose. The first is the positivistic methodologies behind such studies that focus on description, rather than dealing with what ought to be, which is the domain of ethics, and, according to Flyvbjerg, the main strength of the social sciences. Future research should aim to integrate ideas of what should be done, or how decisions can be made by managers working across cultural contexts, into wider cross-cultural studies. It could be argued that it is not the purpose of these studies to do anything other than describe cultural differences in a dispassionate, scientific, way. Yet this argument is somewhat countered by the other main weakness of these studies.

Secondly, as in much of international management studies, these studies appear to reflect a modernization theory that in itself makes judgments about what ought to be. Yet these judgments are held implicitly and do not form part of the methodology of such studies. Critical studies of modernization theory, such as Postcolonial Theory (e.g., Said 1978/1995), may provide a means for future research to critique such Western-centric assumptions, and may be a fruitful area to investigate. It is only when these implicit assumptions are made apparent, and either integrated or controlled for within the methodology, that an argument for their being “objective” can be made.

Yet, from the discussion in this chapter, such broad studies can be seen to be useful to understanding why concepts of ethicality differ across borders, and why a practice may be appropriate in one country and not in another. This is useful information for managers in multinational commerce, but does not answer questions about what these managers should do when confronted with such difference. Codes of ethics, a solution offered by many multinational companies, appear largely ineffective. Decision algorithms may be more useful, but also have their limitations. Yet, the way such decisions are made themselves vary across borders. The effectiveness of different methods that companies use may therefore vary across different countries, and more research needs to be undertaken in this area.

p.570

Essential readings

A useful and thorough examination of cross-cultural theory from the perspective of cultural values comparison can be found in M. Minkov and Geert Hofstede, Cross-cultural Analysis: The Science and Art of Comparing the World’s Modern Societies and their Cultures (2012). A more critical analysis connecting cultural comparative theory with an ethical approach may be found in Terence Jackson, International Management Ethics: A Critical, Cross-cultural Perspective (2011a).

For further reading in this volume on business and business ethics in various nations and cultures, see the selection of chapters in Part VIII: Business ethics across the globe. For further reading on issues of globalization and the West, see Chapter 32, The globalization of business ethics. On the topic of international agreement in norms, see the discussion of the social contract theory of Thomas Donaldson and Thomas Dunfee in Chapter 6, Social contract theories. On theoretical perspectives in management theory, see Chapter 26, Theoretical issues in management ethics. For a critical assessment of relativism in pedagogy, see Chapter 4, Teaching business ethics: current practice and future directions. For a view of business ethics that counsels the explication of practices, including tacit norms, see Chapter 3, Theory and method in business ethics.

References

Apressyan, R.G. (1997). “Business Ethics in Russia,” Journal of Business Ethics 16, 1561–70.

Aycan, Z. (2006). “Paternalism: Towards Conceptual Refinement and Operationalization,” in K.S. Yang, K. K. Hwang and U. Kim (eds), Scientific Advances in Indigenous Psychologies: Empirical, Philosophical and Cultural Contributions. Cambridge: Cambridge University Press, 206, 445–66.

Basáñez M.E. (2016). A World of Three Cultures. Oxford: Oxford University Press.

Brady, F.N. (1990). Ethical Management: Rules and Results. London: Macmillan.

CCC (Chinese Cultural Connection) (1987). “Chinese Values and the Search for Culture-Free Dimensions of Culture,” Journal of Cross-Cultural Psychology 18, 143–64.

Dolecheck, M.M. and C.C. Dolecheck (1987). “Business Ethics: a Comparison of Attitudes of Managers in Hong Kong and the United States,” Hong Kong Managers 1, 28–43.

Donaldson, T. (1989). The Ethics of International Business. New York, NY: Oxford University Press.

Elenkov, D.S. (1997). “Differences and Similarities in Managerial Values between U.S. and Russia Managers,” International Studies of Management and Organization 27 (1), 85–106.

Fischer, R., C.M. Vauclair, J.R.J. Fontaine and S.H. Schwartz (2010). “Are Individual-Level and Country-Level Value Structures Different? Testing Hofstede’s Legacy With the Schwartz Value Survey,” Journal of Cross-Cultural Psychology 41, 135–51.

Flyvbjerg, B. (2001). Making Social Science Matter. Cambridge: Cambridge University Press.

Gatley, S., R. Lessem and Y. Altman (1996). Comparative Management: A Transcultural Odyssey. London: McGraw-Hill.

Glenn, E.S., D. Witmeyer and K.A. Stevenson (1977). “Cultural Styles of Persuasion,” International Journal of Intercultural Relations 1:3, 52–66.

Hofstede, G. (1980a/2003). Culture’s Consequences: International Differences in Work Related Values. Beverly Hills, CA: Sage.

Hofstede, G. (1980b). “Motivation, Leadership and Organization: Do American Theories Apply Abroad?” Organizational Dynamics, Summer, 42–63.

Hofstede, G. (1991). Cultures and Organizations: Software of the Mind. London: McGraw-Hill.

Hofstede, G., G.J. Hofstede and M. Minkov (2010). Cultures and Organizations: Software of the Mind, revised and expanded 3rd edition. New York, NY: McGraw-Hill.

House, R., P.J. Hanges, M. Javidan and P.W. Dorfman (2004). Leadership, Culture and Organizations: The GLOBE Study of 62 Societies. Thousand Oaks, CA: Sage.

House, R., P.W. Dorfman, M. Javidan, P.J. Hanges and M. Sully de Luque (2014). Strategic Leadership Across Cultures: GLOBE Study of CEO Leadership Behavior and Effectiveness in 24 Countries. Los Angeles, CA: Sage.

p.571

Human, L. (1996). Contemporary Conversations. Dakar, Senegal: The Goree Institute.

Hunt, S.D. and S.J. Vitell (1986). “A General Theory of Marketing Ethics,” Journal of Macromarketing 6, 5–16.

Inglehart, R., M. Basanez and A. Moreno (1998). Human Values and Beliefs: A Cross-cultural Sourcebook. Ann Arbor, MI: The University of Michigan Press.

Inglehart, R. (1997). Modernization and Postmodernization: Cultural, Economic, and Political Change in 43 Societies. Princeton, NJ: Princeton University Press.

Inglehart, R. and W.E. Baker (2000). “Modernization, Cultural Change, and Persistence of Traditional Values,” American Sociological Review 65 (February), 19–51.

Jackson, T., etal. (+ 11 authors) (2000). “Making Ethical Judgements: A Cross-cultural Management Study,” Asia Pacific Journal of Management 17:3, 443–72.

Jackson, T. (2000). “Management Ethics and Corporate Policy: a Cross Cultural Comparison,” Journal of Management Studies 37:3, 349–69.

Jackson, T. (2002a). International HRM: A Cross-cultural Approach. London: Sage.

Jackson, T. (2004). Management and Change in Africa: A Cross-cultural Perspective. London: Routledge.

Jackson, T. (2011a). International Management Ethics: A Critical, Cross-cultural Perspective. Cambridge: Cambridge University Press.

Jackson, T. (2011b). “From Cultural Values to Cross-cultural Interfaces: Hofstede Goes to Africa,” Journal of Organization Change Management 24:4, 532–58.

Jackson, T. (2015). “Modernization Theory in International Management Studies and the Role of Cross-cultural Management Scholarship,” International Journal of Cross Cultural Management 15:2, 131–3.

Kağıtçibaşi, C. (1997). “Individualism and Collectivism,” Chapter one in J.W. Berry, M.H. Segall and C. Kağıtçibaşi (eds), Handbook of Cross-Cultural Psychology, Vol. 3, Social Behavior and Appplication, 2nd edition. Boston, MA: Allyn and Bacon, 1–50.

Kemp, L., S. Madsen and J. Davis (2015). “Women in Business Leadership: A Comparative Study of Countries in the Arab Gulf States,” International Journal of Cross Cultural Management 15:2, 215–33.

McClelland, D.C. (1961/1987). Human Motivation. Cambridge: Cambridge University Press.

McDonald, G.M. and C.K. Pak (1997). “Ethical Perceptions of Expatriates and Local Managers in Hong Kong,” Journal of Business Ethics 16, 1605–23.

Minkov, M. and G. Hofstede (2012). Cross-cultural Analysis: The Science and Art of Comparing the World’s Modern Societies and their Cultures. Los Angeles, CA: Sage.

Moreno, A. (2003). “Corruption and Democracy: A Cultural Assessment,” in R. Inglehart (ed.), Human Values and Social Change: Findings from the Values Surveys. Leiden, The Netherlands: Brill, 265–278.

Nakano, C. (1997). “A Survey Study on Japanese Managers’ Views of Business Ethics,” Journal of Business Ethics 16, 1737–51.

Neimanis, G.J. (1997). “Business Ethics in the Former Soviet Union: a Report,” Journal of Business Ethics 16, 357–62.

Posner, B.Z. and W.H. Schmidt (1987). “Ethics in American Companies: A Managerial Perspective,” Journal of Business Ethics 6, 383–91.

Ralston, D.A., R.A. Gaicalone and R.H. Terpstra (1994). “Ethical Perceptions of Organizational Politics: a Comparative Evaluation of American and Hong Kong Managers,” Journal of Business Ethics 13, 989–99.

Rawls, J. (1971). A Theory of Justice. Cambridge, MA: Harvard University Press.

Reidenbach, R.E. and D.P. Robin (1988). “Some Initial Steps Towards Improving the Measurement of Ethical Evaluation of Marketing Activities,” Journal of Business Ethics 7, 871–9.

Reidenbach, R.E. and D.P. Robin (1990). “Towards the Development of a Multidimensional Scale for Improving Evaluations of Business Ethics,” Journal of Business Ethics 9:8, 639–53.

Said, E. (1978/1995). Orientalism. London: Penguin.

Schech, S. and J. Haggis (2000). Culture and Development: A Critical Introduction. Oxford: Blackwell.

Schwartz, S. (1994). “Beyond Individualism/Collectivism: New Cultural Dimensions of Values,” in U. Kim, H.C. Triandis, Ç. Kağitçibaşi, S-C. Choi and G. Yoon (eds), Individualism and Collectivism: Theory, Method and Application. Los Angeles, CA: Sage, 85–119.

Schwartz, S.H. (1999). “A Theory of Cultural Values and Some Implications for Work,” Applied Psychology: An International Review 48:1, 23–47.

Singhapakdi, A., S.J. Vitell and O. Leelakulthanit (1994). “A Cross-Cultural Study of Moral Philosophies, Ethical Perceptions and Judgements: a Comparison of American and Thai Marketers,” International Marketing Review 11:6, 65–78.

p.572

Smith, P.B., S. Dugan and F. Trompenaars (1996). “National Culture and the Values of Organizational Employees: a Dimensional Analysis Across 43 Nations,” Journal of Cross-Cultural Psychology 27:2, 231–64.

Sparrow, P., C. Brewster and C. Chung (2017). Globalizing Human Resource Management. London: Routledge.

Taka, I. and T.W. Dunfee (1997). “Japanese Moralogy as Business Ethics,” Journal of Business Ethics 16, 507–19.

Trompenaars, F. (1993). Riding the Waves of Culture: Understanding Cultural Diversity in Business. London: Nicholas Brealey.

Trompenaars, F. and C. Hampden-Turner (2012). Riding the Waves of Culture: Understanding Diversity in Global Business. New York, NY: McGraw-Hill.

Westwood, R.J. and B.Z. Posner (1997). “Managerial Values Across Cultures: Australia, Hong Kong and the United States,” Asia Pacific Journal of Management 14, 31–66.