Cultural Relativism, Ethical Absolutism, and Bribery Infotec ICT Masters Cultural Relativism, Ethical Absolutism, and Bribery

What is “ethical and cultural relativism” Are you an ethical relativist? http://ethics.sandiego.edu/ActiveWebSurvey/Theory/Survey001_Relativism.asp Sources http://ethics.sandiego.edu/theories/Relativism/index.asp

Results of Survey http://ethics.sandiego.edu/ActiveWebSurvey/SurveyReport.asp?nSurvey=18&From

Rachels’ Analysis Cultural Relativism Claims Different Societies have different moral codes No objective standards in ethics Moral code of one’s society has no special status Every moral standard is culture-bound No universal moral values or norms

A Distinction Cultural relativism vs. Ethical relativism Cultural relativism: there are differences and norms from among cultures Ethical relativism: there is no objective standard or test among the moral standards among cultures. There are no universal or objective standards of conduct. Rachels: cultural relativism = ethical relativism

Cultural Differences Argument General Form Premise: Different codes and practices exist. Conclusion: Therefore, there is no objective “truth” in morality. Fallacy What is believed to what is reality. Counterexamples: earth is flat, center of universe

Unacceptable Consequences of Cultural Relativism Criticizing other cultures e.g. apartheid, Nazi Germany Criticizing one’s own culture e.g. slavery, discrimination

Differences in Belief Systems; Commonality of Ethical Values Beliefs about physical environment/ factual understanding of the world e.g. Callatians and Greeks beliefs about death commonality as respect for parents Pressures of physical environment e.g. Eskimos and role of males as hunters commonality as value for offspring

Common Values Society and Business Back to fundamental principles of a social contract: Rules necessary for society to exist and for business to function Society Protecting offspring Murder Truth telling Business Honoring contracts and agreements Trust and credibility

A Test Case: Excision or Genital Mutilation Cultural difference or violation of a culturally-neutral norm? Reasons for the practice? Possible Test Principle: Does the practice promote or hinder the welfare of people whose lives are affected by the practice?

Lessons and Insights of Cultural Relativism Tolerance of customs and alternative practices fundamental values or principles may be similar Open mindedness examining prejudices and biases Danger of assuming absolute standards conviction of beliefs can lead to hubris (arrogance, excess, pride), the worst of the Greek vices

Donaldson’s Framework What standards or ethical theory should apply when doing business in other countries? Cultural relativism Ethical imperialism Inadequacies of both approaches Relativists—tolerates the intolerable (e.g. violation of human rights of fundamentals of social contract) Imperialists—intolerant of tolerable, i.e. legitimate differences (e.g. gift giving or relative value for fundamental values such as equality or liberty)

Principles of Balanced Approach (Guidelines for Businesses) Respect for Core Values – moral threshold for all business activity Respect for Local Traditions Context Matters

Defining Core Values Respect for human dignity: Not treating others simply as tools or means (recognize value as human) Respect for basic rights Good citizenship: Support and improve institutions in communities

Principled (Creative) Judgment Principles (e.g. Codes and Credos) can provide clarity and direction of value commitment But judgment of implementation requires flexibility and latitude Example: Levi Strauss and Child Labor in Bangladesh

Moral Free Space and Types of Conflicts Conflict of relative development Would the practice be acceptable at home if my country were in a similar stage of development? E.g. wage rates Conflict of cultural tradition Is the cultural tradition in conflict with core human values?

Guidelines for Ethical Leadership Treat corporate values and formal standards of conduct as absolutes Design and implement conditions of engagement for suppliers and customers. Allow foreign business units to help formulate ethical standards and interpret ethical issues In host countries, support efforts to decrease institutional corruption Exercise moral imagination

Bribery What is it? “…bribery of public officials as the voluntary giving (promising or offering) of something of value to a foreign public official in order to obtain or retain business or other improper advantage in the conduct of international business.” (OECD Convention on Combatting Bribery of Foreign Public Officials in International Business Transactions)

Another definition “Bribery: An offer or receipt of any gift, loan, fee, reward or other advantage to or from any person as an inducement to do something which is illegal or a breach of trust, in the conduct of the enterprise’s business.” (Transparency International’s Business Principles for Countering Bribery)

Bribery Cultural difference violation of core business values. Is it ethically wrong, i.e. apart from the law? Why?

Extent of Problem (Transparency International 2004) $400B annually in government procurement 106 of 146 countries score less than 5 on scale of 10 as “clean” 60 countries score less than 3 U.S. about 17th from the top

NGO Efforts Transparency International (http://www.transparency.org) See Business Principles for Countering Bribery Organisation for Economic Co-operation and Development (OECD) (http://www.oecd.org)

U.S. Legal Framework Foreign Corrupt Practices Act (FCPA) (http://www.usdoj.gov/criminal/fraud/fcpa.html) “The FCPA makes it unlawful to bribe foreign government officials to obtain or retain business.” Sanctions: Criminal: $2M for corporations; $100,000 and 5 yrs prison for directors, officers, agent, and employees Alternative Fines Act: Up to twice the amount of corruption payment Sarbanes-Oxley Act Accounting fraud and whistleblower protections

A Recent Case (Titan) San Diego military intelligence and communications company In 1998 Titan entered into joint venture to build “satellite based telephone system” in Benin, Africa. At same time, Titan entered into agreement with Titan Benin Agent, a business advisor to President of Benin. The consultant was retained to “assist Titan in marketing and identifying potential business.”

Consultant Agreement 5% of value of equipment installed in Benin 5 days after agreement invoice for $399,000 submitted. One week later Titan official approved $400,000 wired to Benin to account of relative of Titan Benin agent.

Further Payments 2% were to go for “social payments” for schools, health care, etc. Expedited “social payments” went to the account of Benin Agent rather than government ($2M) and invoiced as consulting services Further payments broken into smaller amounts. $1M to offshore account of agent in Monaco 5 payments ($1.1M) in cash to agent

And More Payments funneled to the re-election of Benin President T-shirts for election campaign Total of $3.5M paid to Titan Benin Agent

Settlement SEC sues Titan in violation of FCPA Titan pleads guilty in 2005 Agrees to pay over $28M in fines and penalties Agrees to retain independent consultant to review FCPA compliance Merger with Lockheed Martin nullified