Discussion Questions Strategic Management and Business Policy (13th Edition) 4. Are people living in a relationship-based governance system likely to be unethical in business dealings? There is no worldwide standard of ethical conduct for business people or any individual. Cultural norms and values vary between countries and even between different geographic regions and ethnic groups within a country. For instance, what might be considered in one country to be a bribe to speed up service might be considered a normal business practice n another country.
Some of these differences could derive from whether a country’s governance system is rule-based or relationship-based. Relationship- based countries tend to be less transparent and have a higher degree of corruption than do rule-based countries. Transactions are based on personal and implicit agreements, not on formal contracts enforceable by a court. Also, information about a business is largely local and private, thus cannot be easily verified by a third party. A business person needs to develop and nurture a wide network of personal relationships.
In a relationship-based country, culture of the country (and the founder’s family) strongly affects corporate culture and business ethics. What is “fair” depends on whether one is a family member, a close friend, a neighbor or a stranger. Since behavior tends to be less controlled by laws and agreed-upon standards than by tradition, business people from a rule-based system perceive the relationship-based system to be less ethical and more corrupt. Moreover, the differences in values between business people and key stakeholders are another reason for what is often perceived to be unethical behavior.
Some businesspeople may believe profit minimization is the key goal for their firm, whereas concerned interest groups may have other priorities, such as hiring of minorities. This difference in values can make it difficult for one group of people to understand another’s actions. All of these factors affect an individual’s ethical behavior and there is not definite answer to a very broad question of whether people living in a relationship-based governance system likely to be unethical in their business dealings or not.
