Business Day ( Johannesburg)
August 3, 2005
By Emile Marx
THE wave of ethics scandals in the corporate world, the most recent of which resulted in the conviction of several senior executives of Parmalat, shows that bribery and corruption are an increasing feature of daily life.
Closer to home, the recent trial of Durban businessman Schabir Shaik and the subsequent dismissal of Jacob Zuma as SA's deputy president have brought the spectacle of corruption into sharp focus. But if the Shaik-Zuma affair teaches us one thing, it is that the question -- what is corruption? -- is not always easily answered.
The lack of clarity around what constitutes a corrupt act or unethical behaviour could be one of the reasons that such behaviour flourishes -- particularly in the developing world.
Recent research by C Gopinath, an associate professor at Suffolk University in the US, examined how business students viewed ethical issues in general and bribery in particular. Worryingly, many were unclear about recognising an ethical issue -- despite many having taken a course in ethics as part of their studies.
Gopinath says the results raise questions about the kind of teaching in ethics that is taking place in business schools around the world. "There is a great need to think beyond course work when it comes to preparing students to be ethical executives," he says.
Corruption is, of course, a worldwide phenomenon. The US economy has been hit by a spate of scandals in the recent past, at companies including Adelphia, Enron and Global Crossing. But there is little doubt developing countries are hardest hit. The latest figures from Transparency International show that the 20 most corrupt countries are almost all classified as "developing".
According to Gopinath, part of the problem is that there has always been an uneasy coexistence between ethics and business. Whereas, at a personal level, a person's ethical behaviour is guided by religion, culture and societal norms, when it comes to business there is no guiding code. Morality appears to take a back seat and transactions are often guided by the minimum legal requirements.
Increasingly, though, business is being called to account. Society is starting to demand that business behaves not merely in a legally acceptable way but in a way that demonstrates good corporate citizenship.
Oliver Williams, visiting professor at the University of Cape Town (UCT) Graduate School of Business and academic director of the University of Notre Dame Centre for Ethics and Religious Values in Business, says that public trust in business is at a low point and, in the long term, this is damaging to the bottom line.
"In the corporate world, the cost of trust lost can be financially significant. It most often results in public pressure for additional regulation and legislation to control business, what economists call transaction costs," says Williams.
Thus there is an urgent need to re-educate business leaders about ethics. A logical place to start is in the classroom -- specifically in the classrooms of business schools where tomorrow's managers and leaders are likely to be found.
In the US, AACSB International, the business school accrediting body, requires that ethics education be included in the curriculum leading to a management degree. This has strengthened the focus on ethics in the classroom, but Gopinath's research raises the question: is this enough?
In a Gopinath experiment, 100 business students were given a questionnaire depicting a hypothetical scenario where a manager of a company, visiting his partner organisation in India, is confronted by a clerk who requests an "overtime" fee to process papers needed for important clearance. Students were invited to decide if they would pay the bribe in order to expedite the work. Half the sample were told that the manager believed that the request for payment was illegal. The other half were left to decide for themselves.
Of the students who had not been told that the request was illegal, 54% said they did not think it was an illegal request and 41% said they would pay. A further 17% who said that they thought it was illegal said that they would probably pay anyway. Of the sample who had been told that the request was illegal, 42% still said they would pay.
Most disturbingly, the fact that many of the students had taken an ethics course as part of their studies appeared to make little difference to their ability to choose the ethical option in the scenario.
The reasons the students gave for their decisions reveal that there is a lack of clarity about bribery and corruption.
In most cases the reasons advanced were based on legality and business expediency: "It is a harmless bribe" or "it is not illegal if it is a facilitation payment" and "such a payment is a cost of doing business".
Some justifications cited that the transaction took place in India. Like SA, India is a developing country that ranks high in the corruption scales and this was used to justify the payment.
These reasons suggest a lack of knowledge about the moral arguments used to arrive at a decision.
"The ability to recognise ethical issues is a fundamental skill that should be a part of ethical preparation for the workplace," says Gopinath.
"Ethical issues are often not obvious and it requires a sophisticated understanding of moral concepts to recognise an ethical issue."
And while ethics courses can provide the theories of moral reasoning, they may not provide students with enough opportunities to practise them, says Gopinath. He recommends that ethics be better integrated across the curriculum so that students are invited to consider all business issues in an ethical light.
AACSB International is pushing for an increased emphasis on ethics in the curriculum. Similar calls should follow from accrediting bodies elsewhere in the world. It is in all of our best interests for our business schools to be turning out managers and leaders who are more ethically aware.
Marx is a freelance journalist. Gopinath presented his paper at the recent 11th international Eastern Academy of Management conference, co-sponsored by UCT's GraduateSchool of Business.