Business Ethics in Brazil Essay

In this comparative survey of 126 Brazilian and U.S. business professionals, we explore the effect of national culture on ethical decisionmaking within the context of business. Using Reidenbach and Robin’s (1988) multi-criteria ethics instrument, we examined how these two countries’ differences on Hofstede’s individualism/collectivism Rafik I. Beekun (Ph.D., The University of Texas, Austin) is Professor of Management and Strategy in the Managerial Sciences Department at the University of Nevada, Reno. His current research interests are in the area of strategic adaptation, the link between national cultures and ethics, and the relationship between management and spirituality. He has published in such journals as Journal of Applied Psychology, Human Relations, Journal of Management and Decision Sciences. Correspondence regarding this article should be sent to him at: Managerial Sciences Department, Mail Stop 28, University of Nevada, Reno, NV 89557-0206. Yvonne Ste dham (Ph.D., University of Kansas) is an Associate Professor of Management in the Managerial Sciences Department at the University of Nevada, Reno. She has published in such journals as the Journal of Management and Journal of Management Studies. Dr. Stedham’s research focuses on the following areas: CEO performance evaluation, gender discrimination in employment, ethics in business, decision making across cultures, and managing knowledge workers. Jeanne H. Yamamura (CPA, Ph.D., Washington State University) is an Associate Professor of Accounting in the College of Business at the University of Nevada Reno. Her teaching responsibilities include auditing and accounting information systems courses. Dr. Yamamura’s research focuses on the management of accounting professionals with a particular interest in cross-cultural differences and her work has been published in accounting and business journals. She has extensive practical experience in the field of accounting through her previous employment in public and private accounting. Rafik I. Beekun Yvonne Stedham Jeanne H. Yamamura dimension are related to the manner in which business practitioners make ethical decisions. Our results indicate that Brazilians and Americans evaluate the ethical content of actions or decisions differently when applying utilitarian criteria. By contrast, business people from both countries do not differ significantly when they use egoistic criteria in evaluating the ethical nature of business decisions. KEY WORDS: Brazil, egoism, ethics, national culture, U.S., utilitarianism As business organizations move from domestic to global and transnational competition, they are finding that cultural values vary significantly across national boundaries, and are likely to affect business practices (Husted, 2000). During the past decade, several researchers (Ferrell and Gresham, 1985; Hunt et al., 1989; Abratt et al., 1992; Hunt and Vitell, 1992; Tsalikis and Nwachukwu, 1991; Vitell et al., 1993) have noted the potential influence of national c ulture on ethics within a business context. What obscures the impact of national culture on ethics is that business practices may conflict with ethical values in a manner that medicine, law and government do not (DeGeorge, 1993). Not surprisingly, empirical research investigating the relationship between national culture and ethical decision-making is relatively sparse (Vitell et al., 1993). A primary reason for exploring the effects of culture on ethics is the increased globalization of business. This trend, in turn, is characterized by a diverse array of interorganizational arrangements that require cross-cultural interaction. As a result, cultural misunderstandings are likely to occur. One of the key areas where such mis- Journal of Business Ethics 42: 267–279, 2003.  © 2003 Kluwer Academic Publishers. Printed in the Netherlands. 268 Rafik I. Beekun et al. understandings take place is in the area of ethics, partly because of the influence that national cultures may have upon business ethics (Husted, 2000). Accordingly, in our study, we explore the relationship between national culture and business ethics. We will seek to investigate what process underlies ethical behavior across national boundaries. Understanding this process may help global managers develop tools to promote ethical behavior in their international workforce. In this research, we compare two culturally diverse countries, the United States (U.S.) and Brazil, in order to identify similarities and differences with regard to approaches toward ethical decision-making in a business context. Since culture is a broad concept, it is necessary to specify the values that could be related to behaviors or practices (Husted, 2000). For the purposes of this study, we used a well-established framework of national culture (Hofstede, 1980). Hofstede conducted one of the most important studies that ascertained the relationship between national culture and management. From this study, he identified several â€Å"value† dimensions along which countries differ. Using Hofstede’s (1980) framework, we carried out a crosscultural, comparative survey to assess the relationship between his individualism/collectivism dimension of national culture and ethical criteria. With respect to ethical decision-making, we adopted the instrument proposed and validated by Reidenbach and Robin (1988, 1990). They have generated a set of scales that measure the core dimensions characterizing different perspectives of ethical philosophy. Defining national culture: Hofstede’s dimensions of culture Multiple definitions and conceptualizations of national culture exist (Hofstede, 1980, 1988, 2001; Kluckhohn, 1951, 1962; Kluckhohn and Strodtbeck, 1961; Ronen and Shenkar, 1985; Trompenaars, 1993). Although these frameworks and conceptualizations typically center on values, they differ with respect to the specific values that are included in their respective frameworks. For instance, Trompenaars (1993) focuses on values related to relationships such as obligation, emotional orientation in relationships, and involvement in relationships. By contrast, Kluckhohn and Strodtbeck (1961) emphasize more global values such as people’s relationship to nature and time-orientation. With respect to our study, Hofstede’s framework of national cultures is the most appropriate since he ident ified values related to economic activity (Husted, 2000). Therefore, his framework is germane for the study of business decisions. Focusing on national cultures, Hofstede (1997, p. 260) defines culture as the â€Å"collective programming of the mind which distinguishes the members of one group or category of people from another†. Thus, although the problems faced by groups (whether organizational or national) are universal, the solutions devised by each group may be relatively unique to that group. These solutions then become taken for granted over time, and may suggest why people hold certain beliefs and behave the way they do (Schneider and Barsoux, 1997). Hofstede (1980, 1988) has suggested that five dimensions of national culture underlie differences in the behavior of individuals from different cultural backgrounds. Since these dimensions describe how individuals view and interpret situations and behavior, they are likely to be related to how individuals engage in decision-making in general (Weick, 1979; Adler, 2002). Ethical decisionmaking, too, is likely to be affected by these dimensions of national culture. Hofstede’s five cultural dimensions (1980, 1988) are power distance, uncertainty avoidance, masculinity/femininity, individualism/collectivism, and long-term/short-term orientation. Power distance refers to the degree to which less powerful members in a country accept an unequal distribution of power. Uncertainty avoidance depicts a people’s ability to cope with ambiguous situations as well as the mechanisms they have created to avoid such situations. Masculinity exemplifies a focus on material things, such as money, success, etc., whereas femininity refers to a focus on quality of life, caring, etc. Individualism, which will be discussed in more detail later, refers to the tendency of people to consider their interests and those of A Comparative Investigation of Business Ethics their immediate family only. By contrast, collectivism refers to the inclination of people to view themselves as part of a larger group, and to protect the interests of group members. Longterm/short-term orientation describes the time perspective people take when dealing with a situation. Table I represents the scores for Hofstede’s cultural dimensions for Brazil and the U.S. While the scores indicate dissimilarities between the U.S. and Brazil on all five cultural dimensions, by far the largest difference appears in the individualism/collectivism dimension. Brazil scored low on individualism, and hence is considered a collectivistic country; by contrast, the U.S. scored high on individualism and is considered an individualistic country. The individualism/collectivism dimension describes how individuals relate to others and to society, and represents the extent to which they are emotionally and cognitively attached to a particular network of individuals. Individualism describes the inclination of individuals to be primarily concerned with their personal interests and their immediate family’s welfare (Hofstede, 1980). Members of a highly individualistic country view themselves as independent of organizations or institutions, and place a higher value on self-reliance and individual action. Collectivism, in comparison, describes a culture where individuals are viewed as part of a larger group, and look after each other. Collectivistic cultures protect the interests of their members in return for their loyalty. In collectivist cultures, morality is defined in terms of the benefits for the in-group (family, friends, work companies, 269 etc.), implying the maintenance of solidarity (Triandis and Bhawuk, 1997). Hofst ede (1980) noted that the individualism/collectivism dimension carried â€Å"strong moral overtones† because this dimension was reflected in value systems shared by the majority. For example, in a highly individualistic country, individualism is viewed as a strength and the major reason for the country’s accomplishments. By comparison, inhabitants of a highly collectivistic country view an emphasis on self as a negative attribute to be eliminated for the good of society. Competing ethical frameworks for business decisions Ethics are the principles of human conduct regarding either an individual or a group (Shaw, 1999), and represent the moral standards not governed by law, that focus on the human consequences of actions (Francesco and Gold, 1998). Ethics often require behavior that meets higher standards than those established by law, including selfless behavior rather than calculated action intended to produce a tangible benefit. With respect to this study, business ethics describe the ultimate rules governing the assessment of â€Å"what constitutes right or wrong, or good or bad human conduct in a business context† (Shaw, 1999). In the assessment of ethical behavior, perception is critical (Hartmann, 2000). Indeed, ethical decisions may be influenced by our own perception, by others’ perceptions of our actions, and by our perception of â€Å"universal laws†. As a TABLE I Cultural dimensions (Hofstede 1980, 1988, 2001) Dimensions of culture U.S. Brazil Difference Power distance Uncertainty avoidance 40 46 69 76 (29) (30) Individualism/Collectivism 91 38 53 Masculine/Feminine Confucian Dynamism 62 29 49 65 13 (36) 270 Rafik I. Beekun et al. result, our final choices may be determined by the perception tha t is the most salient at the time. Further, Hartmann suggests that cultures may differ not only with respect to the ethical principles underlying decisions but also with respect to which of the three stakeholders – self, society, and universal laws – is emphasized in any given situation. Depending on which stakeholder is emphasized, people from different cultures may vary in their assessment of the ethical nature of a decision. Across most situations, ethical principles that distinguish right from wrong actions are encompassed by several normative theories, e.g., justice, relativism, egoism, utilitarianism, and deontology. These theories can generate potentially conflicting interpretations of what is ethical or unethical, originating from the very nature of the theories themselves. Moreover, prior research (Cohen et al., 1996; Hansen, 1992; Reidenbach and Robin, 1988, 1990) indicates that individuals making ethical decisions do not select a single theory or philosophy by which to make their decisions. In fact, Reidenbach and Robin (1988) found that a varying combination of ethical philosophies or theories is employed when ethical decisions are made. Shaw (1999) draws a distinction between two types of ethical theories, consequentialist and nonconsequentialist. Consequentialist theories suggest that the moral rightness of an action depends on the actual or intended results of the action. What is right is determined by â€Å"weighing the ratio of good to bad that an action is likely to produce† (Shaw, 1999, p. 45). A key issue underlying consequentialist theories is the nature of the beneficiaries of the action under consideration. Should one consider the consequences for oneself or for all involved? The most important consequentialist theories are egoism and utilitarianism. Egoism promotes individual self-interest as the guiding principle whereas utilitarianism advocates that everyone affected by the action or decision must be taken into account (Shaw, 1999). By contrast, nonconsequentialist theories suggest that it is not simply the consequence of an act that matters, but also its inherent character. Although these theories do not deny that con- sequences are morally relevant, they assert that other factors are also important in assessing the moral significance of an action. For example, â€Å"breaking a promise† is wrong not simply because of the consequences that result from breaking it, but also because of the nature of the act itself. In this study, we focus on consequentialist theories for several reasons. First, Hofstede’s individualism/collectivism dimension can be clearly and easily related to the two consequentialist theories. Second, the two theories represent the perceptions of two of the three possible sta keholders identified by Hartmann (2000), namely own perceptions and others’ perceptions. Third, staying within one theoretical category allows for a much more parsimonious, yet thorough, analysis. Ethical perspectives and national culture: hypotheses Whether egoistic or utilitarian principles are employed, ethics are a product of a society’s culture, which includes its traditions, values, and norms. Within a society, ethical behavior is generally agreed upon. Francesco and Gold (1998, p. 40) explain that â€Å"members implicitly understand how relationships, duties and obligations among people and groups ought to be conducted, and distinguish between their selfinterests and the interests of others.† However, when two or more countries interact, they often find that their ethics differ. According to Hendry (1999), these differences may lead to three types of culturally based ethical conflicts. First, there are those conflicts where the ethical values typifying the two national cultures lead to differing conclusions; what is deemed unethical from one perspect ive is considered to be ethical from the other. Second, conflict may arise when businesspersons from one culture consider something morally significant whereas their counterparts from another culture are ethically neutral. Third, business people from two cultures may interpret a common situation differently even when there is some commonality among their national values. A Comparative Investigation of Business Ethics To investigate the relationship between national culture and ethics, we chose two culturally diverse countries, Brazil and the U.S. Given the differences in their respective national cultures, we expect Brazilians and Americans to differ in their assessment of the ethical content of business decisions. Accordingly, we propose the following hypothesis: H1: The assessment of the ethical content of business decisions is a function of national culture. Egoism and individualism/collectivism According to egoism, the only valid standard of one’s behavior is one’s obligation to advance one’s well-being above everyone else’s (Beauchamp and Bowie, 1997). Promotion of one’s own longterm interest is viewed as the only worthwhile objective and the only determinant of whether an act is morally right or not. Nothing is owed to others or to the organization that one works in. Those who abide by this approach to ethics intensely believe that all altruistic efforts by others are really acts of self-promotion since an individual may have to help others in order to advance his/her own interests. Brazil is collectivistic whereas the U.S. is individualistic. As discussed earlier, persons from an individualistic culture emphasize their families’ and their own int erests. H1.a: When applying egoistic criteria to judge the ethical content of an action or a decision, respondents from the U.S. will be less likely than respondents from Brazil to see a decision or action as unethical. Utilitarianism and individualism/collectivism Utilitarianism, in direct contrast to egoism, â€Å"is the moral doctrine that we should always act to produce the greatest possible balance of good over bad for everyone affected by our action† (Shaw, 1999, p. 49). Although utilitarians also 271 evaluate an action in terms of its consequences, an action is ethical if it results in the greatest benefit or â€Å"good† for the largest number of people. Issues of self-interest are not germane since actions are assessed in accordance with one primary standard: the general good. Utilitarianism has long been associated with social improvement and the promotion of actions that are in the best interest of â€Å"the community.† Actions are right if they promote the greatest human welfare. Brazil is collectivistic. Persons from a collectivistic culture focus on actions that lead to the greatest benefit for most members of a group. H1.b: When applying utilitarian criteria to judge the ethical content of an action or a decision, respondents from Brazil will be less likely than respondents from the U.S. to see an action or decision as unethical. To be consistent with prior ethics research (Reidenbach and Robin, 1988), the above hypotheses (H1.a and H1.b) together suggest that Americans and Brazilians rely on more than one ethical criterion when assessing the ethical content of an action or decision. However, we are also suggesting that when each specific ethical criterion they refer to is considered separately, people from different national cultures will vary in their assessment of the ethical content of a course of action or a decision. Methodology Sample Data were collected from 126 respondents – 92 from the U.S. and 34 from Brazil. U.S. participants included MBA students at a regional university as well as business professionals. Brazilian participants were all students enrolled in an Executive MBA program. We used MBA students in our study for two reasons. First, MBA students are a commonly used proxy for business people (Dubinsky and Rudelius, 1980). Dubinsky and Rudelius’ (1980) comparison of 272 Rafik I. Beekun et al. student versus professional evaluations found a high degree of congruence between the two groups. Second, since all students (both U.S. and Brazilian) were currently employed by companies or had recent professional work experience, the sample can be used as a proxy for business professionals in both countries. Data collection The instrument we used was Reidenbach and Robin’s (1988) pre-validated, multi-criteria instrument incorporating the core dimensions that underlie several ethical perspectives. We selected this survey instrument because it is a multi-philosophy and multi-item questionnaire. As a result, it will enable us to assess both ethical dimensions of interest, i.e., egoism and utilitarianism, simultaneously. This instrument incorporates multiple items for each ethical philosophy and, therefore, is relatively more reliable than single item instruments (Kerlinger, 1986). Reidenbach and Robin’s instrument includes an initial set of scales that has shown evidence of high reliability and modest convergent validity with respect to U.S. respondents. The scales correlate highly with a univariate measure of the ethical content of situations. Hence, the instrument can be said to have high construct validity in the U.S. Additional reliability and validation efforts for the wh ole sample and for Brazil specifically are reported below. Using a seven-point Likert scale (1 = ethical, 7 = unethical), respondents were asked to rate the action in three scenarios using the criteria (items) described in Table II. The perception of and the criteria emphasized in evaluating the ethical content of a decision or situation depend on the nature of the decision or the situation. In accordance with previous research, scenarios will be used in this study to provide the contextual stimulus and to motivate the evaluation process (Alexander and Becker, 1978). We adopted the three scenarios developed and validated by Reidenbach and Robin (1988, 1990). Table III presents the three scenarios used in this study. Data were collected by means of the abovementioned instrument administered to Brazilian participants (in Portuguese) and provided via written instrument and website access to U.S. participants (in English). The Brazilian instrument was back translated to ensure equivalence. Efforts were made to establish the reliability and validity of the instrument in this comparative context and are reported as follows. We examined the reliability of the instrument by assessing its internal consistency through the use of Cronbach’s alpha. Since we used three different measures (one for each of the scenarios), we calculated three inter-item coefficient alphas. The Cronbach alpha was 0.81 for the first scenario, 0.75 for the second scenario and 0.86 for the third scenario. All three coefficients indicate that the scale items are internally con- TABLE II Ethics instrument scales Ethical perspective Items (Seven-point Likert scale †“ 1 to 7)* Egoism Self promoting/not self promoting Self sacrificing/not self sacrificing Personally satisfying/not personally satisfying Utilitarianism Produces greatest utility/produces the least utility Maximizes benefits while minimizes harm/minimizes benefits while maximizes harm Leads to the greatest good for the greatest number/leads to the least good for the greatest number * Generally speaking, in the above bipolar scales, 1 = fair or just or efficient (ethical) whereas 7 = unfair, unjust or inefficient (unethical). A Comparative Investigation of Business Ethics