Understanding Business Ethics in Asia: A Study of Several Ethical Issues in Japan, Indonesia and Mongolia Anggita Putri, Nasa Lkhagvasuren, Takashi Ushijima Brigham Young University International business ethics has been an issue researched and understood by companies, government entities, NGOs, and other institutions worldwide. Understanding business ethics becomes more important as entities understand the significance of cultural values in different countries.
De George (1997) describes that as business is going global and cultural values are becoming more evident, it is “more urgent for agreement on common values that make world trade and commerce possible without any party feeling or being exploited”. This agreement on common values has been achieved on some scale and level; however, in many parts of the world, cultural values and circumstances usually still hold more weight in the decision process. This paper addresses several ethical values in three representative Asian countries: Japan, Indonesia, and Mongolia.
The three countries are located in three different parts of Asia with difference in economy, social, and culture values. Therefore, each country has its own unique way of approaching and overcoming ethical issues. For each of the different issues, we will provide background information and history and then we will discuss and develop the issue. First, the paper will address Nabakari-Kanrishoku (Nominal Manager) which is an ethical issue in the workplace in Japan. Second, the paper will discuss gratification giving in local and national government which is a prevalent ethical issue in Indonesia.
Last, the paper will talk about the development of ethical standards in Mongolia. The conclusion of the paper will summarize the importance of understanding cultural aspects while implementing ethical standards in different countries, and discuss a few ethical theories that will help frame the ethical issues discussed. Japan Background Information Since the birth of the idea of Capitalism, a conflict of interests has existed between employers and employees. In general, employers’ genuine best nterest is to maximize their profits; whereas, the employees’ interests are to receive wages out of the least work hours. However, without regulations, laws, or rules, historically, the conflict has tended to favor the employers. Therefore, working long hours has been one major ethical issue in workplaces all over the world, especially in capitalistic countries. Nabakari-Kanrishoku (nominal manager)-hereinafter referred to as NK- is a unique phenomenon in Japanese society which represents the working-long-hours ethical issue in Japan.
Labor Standard Act (hereinafter referred to as LSA) prohibits that working hours exceed 40 hours per week unless (1) the agreement exists between the employer and the employee and approved by municipalities (Article 36) or (2) the employer pays overtime rate to the employee (Article 37). Ethical Issues in Workplace in Japan: Nabakari-Kanrishoku (Nominal Manager) The dilemma exists between employers and employees under recession. Employers have to make sure their business runs appropriately and generates a sufficient amount of profits.
In the case of a recession, employers/companies have to cut costs significantly because increase of revenue is rarely expected. In general, the large amount of expenditure is labor costs; therefore, cut labor costs, such as layoffs, increase the workload of each employee. However, the increase of workload often causes overtime work for each employee and the increase of overtime premium adversely affects the cut labor costs (Mizuno, 2012). Therefore, employers/companies have to face the dilemma of how extensive their cut labor costs will be while also dealing with the increase in employee workload and overtime work.
Responding to such a dilemma, NK emerged in the Japanese business society as a loophole of LSA when Japan started experiencing recession in the 1990s. LSA states that management representatives are not subjected to the work-hour regulation ratified by LSA article 32, which stipulates 40working-hours per week as a legal ceiling of weekly working-hours (Article 41). Therefore, some employers/companies promote and consider managers as management representatives to avoid the weekly working-hours regulation in order to have them overwork without an overtime premium.
Those management representatives are often not credited with any authorization or allowance for the position. The media sarcastically began to call these management representatives “Nabakari-Kanrishoku” (nominal managers). Unethical Consequences of Nabakari-Kanrishoku The major reason why NK is an ethical issue is that employers/companies tend to force NK to overwork. LSA is set up for balancing employer and employee interests to protect employees’ health and human rights. Then, the relationship between employers and employees tends to favor the employers side without LSA regulation because of its power balance.
NK is not protected by the LSA weekly working-hour regulation, so they are highly likely to overwork. The research conducted by JILPT (Japan Institute for Labor Policy and Training) indicates that most managers (60. 2 percent of department chief and 53. 4 percent of department head) feel their workload cannot be accomplished within their given working-hours (40 hours per week) so overwork is unavoidable (Ogura, 2009). NK’s overwork often leads to two types of unethical consequences. One is that employers/companies do not pay an adequate amount of wages to employees who are NK and overworked.
The other is that overworking NK’s damages their health and causes them to be non-workable. Both types of unethical consequences are exposed by the lawsuit of McDonald Japan in 2008. Mr. Hiroshi Takano, former store manager of the McDonald Kousaka Branch, overworked for 136 hours in a month at maximum and worked 63 days in a row (Yashiro, 2009). Even though he had worked many hours as a store manager, he did not receive a premium and his wages ended up on the same level as his subordinate’s wages, who received overtime premium every month (Yashiro, 2009).
After being overworked, he was diagnosed with an asymptomatic cerebral infarction due to overwork and lack of sleep. Under such condition, employees cannot have a healthy, balanced life. The lack of healthy, balanced life then leads to negative impacts on their performance in the workplace; therefore, employers/companies must avoid utilizing NK as their labor cost cut strategy in ethical and business management terms. When working at a Japanese Bar, Murasaki, one employee was obviously an NK.
He was expected to work and run the bar even if there were enough employees to operate. He always overworked and rarely took a day off. He ended up quitting his job when he fell sick due to overwork, and the bar experienced a tough situation after he quit. Murasaki’s unethical management not only damaged one employee, but also its business administration. Indonesia Background Information Similar to any other developing country, corruption is a prevalent ethical issue in Indonesia. Corruption takes many forms and is practiced in all levels of government.
Because Indonesia is a country with many islands with over 30 provinces, corruption is more common in some areas than in others. Srinivasan (2012) argued that there are two major categories of ethical issues: societal, that consists of widespread corruption and weak legal enforcement systems, and organizational, that consists “of creating corporate cultures within organizations that breeds ethical conduct”. Both of these categories have happened in government institutions throughout Indonesia.
Some major changes that the Indonesian government has made are: replacing employees, especially government institution managers that are guilty of corruption, changing the internal system and procedures of the institution, and encouraging citizens to help institution managers and staff to avoid corruption. One form of corruption that is very common in Indonesia is called gratification. Gratification in Local and National Government in Indonesia After the democratic revolution in 1998, Indonesia faced several presidential changes.
When the current president was elected, he formed a national committee of corruption eradication (Komisi Pemberantasan Korupsi or KPK) to eliminate corruption from all levels of government. Since it was formed, the committee has been able to identify and investigate corruption cases from top managers in the government. In 2010, the committee also did a survey to assess public sector integrity on a local and national level. The committee specifically focused on gratification cases using these indicators: the monetary value of gratification, as well as the time, the meaning , and the purpose of gratification giving.
The committee found that among 50 government institutions on both the national and local level that were surveyed, 24 of them have a lower integrity rate than the appointed standard integrity rate for the survey. Most institutions out of the 24 surveyed were at the local level. The giving of gratification happens when citizens pay extra fees to the institution’s staff other than the established fees to quicken and complete their documentation process or to obtain certain permits so that they don’t have to wait in line or to wait for a few days.
The research also found that gratification often happens at the beginning of the documentation process. Gratification frequently occurs when obtaining citizenship cards and building permits. For example, if a certain company wants to obtain a building permit, a representative of the company would give extra money to one of the staffs that process the document to either make sure that building permit is ready within one day or to not disqualify the company if it misses some required papers.
The committee also discovered that the working environment of institutions has an effect on whether citizens are likely to be involved in gratification giving. The committee argued that uncomfortable service environments and incomplete information cause citizens to be reluctant in processing their documents. This possibly creates external procedures by using a middle-man or giving gratification money to the institution’s staff. Overcoming the Issue
De George (1997) quoted these sentences from the Wall Street Journal: “In May 1996, the United States proposed that the “World Trade Organization (WTO) outlaw bribery on government projects. In reply, the Indonesian Trade and Industry Minister Tunky Ariwibowo said: “We do not have common standards on issues like corruption… Any effort to relate them to trade will be detrimental to the functioning of the WTO in the future’ (Wall Street Journal 6 May 1996: A14)”. As a comment to that reply, an editorial writer from the Wall Street Journal wrote a column entitled “Is Corruption an Asian Virtue? Corruption is clearly not an Asian virtue. De George continued to say that “both the Wall Street Journal’s question and the statement by the Indonesian Minister exemplify deep misunderstandings and differences between the two, and between the groups they represent”. It is clearly difficult to pinpoint what kind of ethical values should be the same for every country because there are different factors that contribute to the development of the economy and society of a country. In the research done by the national committee of corruption eradication, 56 percent of citizens believes that gratification is not acceptable.
However, many of the citizens do not fully understand the meaning of gratification, the ethical consequences of the issue, and are not assertive enough in stopping the practice. Most citizens agree that gratification is illegal and that it is something which needs to be eliminated in order to create a system that is fair and effective for every citizen. Therefore, trainings and campaigns are needed for both the government institutions and the citizens in order for each group to support the discontinuation of gratification giving. Mongolia Background Information Mongolia is a landlocked country with a population of three million people.
Mongolia was under strong Russian and Soviet influence; therefore, Mongolian politics followed the same patterns as the Soviet politics of the time. After the breakdown of communist regimes in Eastern Europe in late 1989, Mongolia saw its own democratic revolution in early 1990, which led to a multi-party system, a new constitution in 1992, and a transition to market economy. The growth of the economy attracted more attention from foreign investors, whose interest in investing in the country has recently skyrocketed due to the discovery of rich minerals in MongoliaEthical dilemmas in the work field did not become a big issue until 1990.
It was difficult for a lot of Mongolians to adapt to changes in the work field because people were used to being told what they should do at work. The Development of Ethical Standards in Mongolia As in any other country, gaining a deeper understanding of the Mongolian attitude towards business ethics depends to a large extent on knowledge of the local market condition and historical background. According to IMF, The Mongolian economy is growing rapidly from 9% to 14. 4%. With continuing economic progress and interest growth from foreign investors, business ethics are likely to increase in importance.
Because some actions may be considered moral in one culture and viewed unethical in another, it is important to understand the ethical values of other countries. Choi & Zuzaan (2011) in Journal of Applied Ethics conducted a survey that identified the action and behavior of role models as a principal influence on unethical behavior in Mongolia. The result of the survey indicated that 45. 6 percent of the respondents said that unethical practices exist in their industry and 25. percent of the respondents wanted to eliminate cheating customers, dishonesty in making or keeping a contract, miscellaneous unfair competitive practices, and dishonest advertising. Giving of gifts, gratuities, and briberies are very common in Mongolian business practice, but 10. 7 percent of the survey respondents want to eliminate this unethical practice. Most international comparison agencies indicate that Mongolian companies make less effort in instilling ethical practices in their employees than in other Asian firms. However, the majority of managers in Mongolia (60. 8 percent) think their companies make an effort to some extent.
The survey results show that nearly half of the companies rely on a code of ethics and do not think that companies put enough effort into building ethical values in their organizations. If companies can put more effort into building ethical values in their organizations, they will be more successful in implementing their organization’s ethical values and feel more responsible to local communities. It is not uncommon for business managers to experience conflicts between their personal ethical beliefs and the interest of their companies. Almost half of company managers have experienced this type of conflict in their career.
More than half of the managers responded that they would act depending on the situation. One of the main reasons managers make unethical decisions is often related to personal financial needs. As the Mongolian economy continues to develop, this is expected to diminish. Looking to the Future How is today’s level of ethical standards in Mongolia compare to ten years ago? Half of the respondent managers said that it has gotten better. For example, before the 1990’s transition period, it was common for Mongolian children to drop out of school in order to help their parents herd privatized livestock.
Helping parents with livestock was given greater importance than education because it helped families accumulate wealth. Conversely, 90 percentof the total populations are high school or university graduates today. The transition resulted in making education more important in society and introducing ethics in school. Hopefully this gradual development will lead to a higher business ethic in society in the long run. Because Mongolia is a developing country, the country will continue to struggle with ethical values in the business field.
However, Mongolians have already started to practice codes of ethics and training employees in ethics. Old, Mongolian tradition, the remaining tradition of the Soviet period, and the transitional process influences how Mongolians view their personal and business ethics. As the Mongolian economy grows and progresses, an increase in building ethical value will also come along with all the other practices. Conclusion Ethical theories, such as utilitarianism, deontology, virtue ethics, and social contracts can also play into the decision making process. For example, the bribery case in Indonesia can relate to disclosure decision criteria.
Think about if those that have been involved in bribery think twice before doing so and ask a question whether this decision will affect image and reputation if it goes public. They may have avoided giving gratification money and would encourage others not to do so. Take another example, what if the nominal managers use the dignity decision criteria? They may not force their employees to work long hours because it would mean treating the employees as a mean to an end in themselves, not just as a means. As discussed above, three different Asian countries presented different ethical issues.
Nominal Manager may be a prevalent ethical issue in Japan but it may not be in Mongolia. Gratification giving is very common in Indonesia but it may not be in Japan. De George (1997) argued that each economy is a combination of the country’s political system and cultural values. Consequently, ethical justifications differ from country to country. He further gave an example of Confucian values, which include “co-operation over competition; community over the individual; paternalism over the market; long-term over shortterm interests; harmony over conflict; and loyalty, harmony and respect over their opposites”.
These values could appropriately explain the transition in countries that uphold those values and why some countries, especially in Asia, view some ethical issues differently than other countries References Choi, T. , & Zuzaan, B. (2011). Business Ethics in Emerging Markets: Evidence from Mongolia. Ramon Llull Journal of Applied Ethics 1:89-120. De George, R. T. (1997). Ethics, Corruption, and Doing Business in Asia. The Asia Pacific Journal of Economics & Business 1. 1: 39-52, 114. Direktorat Penelitian dan Pengembangan. (2011).
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