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Question 1: Dr Chin Kia Soo, a medical doctor by training, is the CEO of the Heal Thyself Healthcare Cluster (HTHC).

HTHC has an ambitious plan to aggressively expand its business operations in Asia, capitalizing on the growing affluence (and ageing) of the middle class across Asia. In the many business periodicals that he reads, he comes across many articles dealing with the moral hazards of doing business in Asia. This, of course, did not surprise Dr Chin since many of his business associates at the Singapore Mahjong Union (SMU), where he is a regular, had regaled him with stories of how challenging the business environment in Asia and elsewhere can be. In particular, Dr Chin has been mulling over the need for a code of ethics for HTHC, given the challenges of doing business across different jurisdictions. His in-house ethics specialist has proposed that the following cross-border cultural sensitivity guideline be included in the companys international business guidebook, Competing Overseas: Growing our Business and Keeping Our Values Intact, to deal with the differences in business practices in the many countries that HCTC operate in: These rules will apply in Singapore as well as overseas. However, where foreign laws, customs and circumstances may differ, everyone will respect the rules and customs of that country. Employees will defer to the head of personnel of that business unit, who will determine the groups stance according to each individual situation. Earlier today, Dr Chin had a conversation with Dr Bob B. Riber, a healthcare administrator who has many years of experience in running profitable hospitals in emerging economies in Asia. The conversation between Dr Chin and Dr B. Riber on doing business in a developing country in Asia (country Y) where corruption is endemic and the rule of law weak follows: B Riber: I think there is nothing wrong with making payments to poorly paid low-level public officials to get the applications needed for the hospitals operations processed. Who knows how long they will sit on them if I dont make such a payment? I will be at a competitive disadvantage if I dont pay! I have a business to run. Ethics is nice to have but it should not stand in the way, especially if it wont solve my business problems! Chin KS: But isnt making that payment effectively a bribe? Whats the difference between bribe payments to secure business and payments to help facilitate administrative procedures? Are you not still making a payment to secure an unfair advantage? B Riber: Hey, I am only encouraging the public officials to do what they are already supposed to do. I am not at all asking them to give my application any undue favour. Furthermore, it is the culturally appropriate thing to do in country Y. Try doing business by disregarding local norms. You wont get anywhere!

Dr Chin Kia Soo urgently seeks your professional advice as an ethics consultant. In advising, the following should be addressed: Identify and examine the ethical issue(s);

How might better managing the ethical concerns give Dr Chin and HCTC a firstmover advantage? Why?

The ethical dilemma is clear for all to see. Whilst it is the business norm for businessmen to pay officials to speed up the applications process in developing countries with the officials themselves also expecting facilitation payment, it is clearly not ethical to do so as it constitutes to bribery in ones own country. This is the problem of ethical relativism which is troubling companies which are expanding internationally and it is most apparent in developing countries. As companies grow into multinational companies, ethical relativism will have a profound effect on the operation of the company in different countries and cultures, especially so in a country where the rule of law is weak and the ethical boundaries are nonexistent. The school of ethical relativism states the difference in beliefs, customs, norms and cultures across countries will give rise to multiple sets of ethical standards on what is right or wrong. The question we should address is should we adhere to the phase: When in Rome, do as the Romans do". Lets go through some of the ethical issues from the views of the prism of ethical theories, mainly the consequentialist and non-consequentialist ethical theories which would have arisen from Dr Chins impending actions. From the non-consequentialist ethical theories, in particular referring to German philosopher Immanuel Kants ethics of duties and John Lockes ethics of rights and justice (Andrew Crane & Dirk Matten, 2010), we shall examine how Dr Chin should ideally behave. Kant believes that humans could be regarded as independent beings, capable of making their own rational decisions regarding right and wrong. Based on these beliefs, Kant developed a

theoretical framework called the categorical imperative which should be applied to every possible moral issue. The categorical imperative consists of three parts: Maxim 1, act according to that maxim by which you can at the same time will that it should become a universal law. Maxim 2, one should act so that you treat humanity, whether in your own person or that in of another, always as an end and never as a means only. Maxim 3, one should act only so that the will through it maxims could regard itself at the same time as universally lawgiving. Putting it simply in words, Dr Chin should check if his impending actions could be performed by everyone and is consistently right following an underlying principle. He must also ensure that we should only treat humans as an end and never as a means to achieve his wants. Lastly, Dr Chin must be able to accept the views of others and see if his actions are universally accepted. Lets dwell on Kants framework and see if it violates any of the maxims. If Dr Chin had given bribes to the official, he would have gained an unfair advantage over other applicants which would have violated maxim one. He would also be violating maxim two by treating the official as a means to achieve his objective of getting his application processed quickly. Last but not least, Dr Chin would have violated maxim 3 as he is harming the society at large by his actions as he is promoting bribery blatantly in the country. In addition, he would also have destroyed the reputation and trust between Heal Thyself Healthcare Cluster (HTHC) shareholders and its customers .The basic foundation of trust which HTHC had been founded on would have thus be rocked and if Dr Chins bribery would have been exposed, it would further destroy all goodwill and trust which HTHC had built through the years and affect their plans to expand internationally. John Lockes ethics of rights and justice was conceptualized based on the notion natural rights or moral claims, which humans were entitled to. These rights could include the rights life, freedom, speech, conscience, privacy and fair legal rights. Applying it to Dr Chins case, he would thus be gaining an unfair advantage over other applicants. By giving the bribe, Dr

Chin would be violating the ethics of rights and justice. There will be an inequality arrangement where the official will process Dr Chins application first instead of processing the first application which had been submitted. From the consequentialist ethical theories in particular referring to Adam Smiths egoism and British philosophers and economists Jeremy Bentham and John Stuart Mills utilitarianism(Andrew Crane & Dirk Matten, 2010), we will examine Dr Chins consequences if he undertakes a clean route. The egoism ethical theory highlights that an action is morally right if the decision maker freely decides in order to pursue either short term gains or their long term interests. Applying to Dr Chins situation, he must assess the situation for himself and the company. Will he be dismissed if he had missed out on this application and only successful in building up the healthcare center after the economy had flourished? What is his contractual obligation to the company? What will the potential loss be for the company? Would it be a loss of time due to bureaucracy or a loss of the application? Would the company lose its reputation if payment is made? The utilitarianism ethical theory states that an action is morally right if it results in the greatest amount of people affected by the action. In this context, Dr Chin must evaluate his actions based on how much it would affect various stakeholders should he decide or not decide to make the facilitation payment. This is in essence a cost-benefit analysis. If he decides to forgo the payment, the people in the developing country will not be able to enjoy good healthcare whereas the companys reputation will be intact and not subjected to scrutiny. If he decides to pay, jobs will be created and the economy of the country will be lifted along with good healthcare. The company will also be happy that the deal can be processed quickly. Milton Friedman had also championed that the social responsibility of business is to maximize profits which in turns provides social welfare and creates jobs for locals as long as it obeys the law and ethical custom (engage in open and free competition; no fraud and deception). The line between the

law and customs are however blurred. Should Dr Chin advocates Milton Friedmans teachings; he will pay the bribe for the better good for the corporation, mankind and economy. In terms of sustainability, will the first bribe which he gives constitute to further bribes of larger values? Dr Chin should know that humans are greedy by nature and if he offers the first bribe, officials expectations will be raised. The multiplication effect takes place immediately, as word circulates that Dr Chin is willing to pay facilitation fees, other departments officials will expect the same payment too. What about officials who have no connection with Dr Chins application? They could also threaten Dr Chin that he had bribed officials and in turn ask for a bribe to keep them shut. It is definitely not sustainable in the long run! This also brings to mind of Corrupt Practices Investigation Bureaus (CPIB), Deputy Director (Intelligence), Mr. Ang Seow Lians shared experience. He had mentioned that the practice of facilitation payment is prevalent in PSAs port where customers would put a token sum of money near the crane to expedite the process of loading and unloading the containers off ships. Although this is common practice over the years, CPIB is cracking down on this practice. The fact that the law catches up makes it even not worthy for Dr Chin to practice bribery. Should the law catch up, not only will HCTC be implicated, Dr Chin would also be convicted. There is also the blurred distinction between right and wrong as Dr Chin subjects himself to prolonged working rules in these countries. He will soon not be able to differentiate that it could be wrong to give a facilitation payment in certain countries. Sooner or later, he will be caught doing the right thing in a wrong country or culture. Most importantly, Dr Chin must realize that as HTHC expands internationally, HTHC represents the parent government and country which it originates. The reputation of the country itself would very much be affected, investors would lose confidence not only in

HTHC but also in the parent government and country. HTHCs businesses would thus be affected locally as well. It is a domino effect which HCTC cannot afford to face. For Dr Chin, the question is not whether bribery is right or wrong, but whether doing business in certain countries is even possible without such practices. There are certainly different ways of doing business. Dr Chin should instead focus on building relationships and goodwill with officials and assure them of the benefits of opening a healthcare center in the country and how it benefits the people in the country. If Dr Chin is pressed for a facilitation payment, he must seek to explain to the local officials about the laws governing his company, as well as those governing his country as the basis of his unwillingness to provide a facilitation payment. He must explain to local officials in a tactful way that his company is subjected to external audits governed by the parent government and if checked, not only will he himself and the company be implicated; the officials themselves will also be subjected to scrutiny. Through better management of the ethical concerns, Dr Chin and HCTC would gain a first-mover advantage. As a responsible leader and organization, Dr Chin should uphold the integrity and value of himself and HCTC and lead by example. Not only do employees look up to the leader, the world will also be evaluating Dr Chins actions. As a leader, his actions and beliefs is the soul of HCTC. Employees would learn, breathe the vision and beliefs as laid out by Dr Chin. I believe that the future gains of being ethical outweigh the benefits of being unethical. HCTC should align its corporate strategy with its ethical values. It will contribute to HCTCs long-term success and give it a first-mover advantage. Being in the medical industry, HCTC should be aware that their future depends on their ability to be medically and socially ethical. If HCTC cannot even stand up to such test of its ethical values, how will it be able to assure patients that there is no foul play or bias behavior in the organization? For example, would the rich have access to organs compared to those that are

in dire needs of an organ just because they can pay for it? Are wealthier patients being paid more attention as compared to those who are poor? There will certainly be a breach of trust between society and HCTC. HCTC must therefore build trust and gain global recognition. By dealing its businesses ethically, governments will notice HCTCs good behavior and welcome their expansion in their countries. It must also be said that the generation Y appeals to loyalty and it is also easier to retain talent within HCTC as the young uphold justice due to education. HCTC will also be able to uphold its corporate standard and be a role model in the medical field. As its reputation grows, HCTC will certainly not be subjected to future facilitation payments with its strong reputation of being ethical. Developed countries which uphold ethical values may even recognized the good values of HCTC and invite HCTC to open up a healthcare center in its country without having to pay any fees or even taxes. Most importantly, as the legal system develops in developing countries and catches up with companies, HCTC will stand firm as it did not do any wrong whilst those who paid their facilitation fees will be subjected to scrutiny not only from the law but also from the society. HCTC would certainly not want to be on the wrong side of the law. HCTCs reputation is of much more value in the long run and in the medical industry, an ethical and clean reputation matters. (1999 words)

Question 4: Critically analyse the following statement: Strong internal controls in a firm, as part of corporate governance, contribute towards deterrence and detection of individual and corporate wrong doing. But often these controls are inadequate. Leadership is the most critical factor in ensuring ethical and socially responsible conduct. A nation needs a President just as a company needs a Chief Executive Officer. The actions of the leaders are being watched and mimicked by the people all the time. It would thus be natural that a leader could assert the most influence and thus ensure that his or her people would behave in the most ethical and responsible conduct. Whilst the leader is being looked up to, he or she may only be effective only to a certain extent. Strong internal controls and systems in a country such as the law or in a firm as part of corporate governance are still of importance and contribute towards deterrence and detection of individuals and corporate wrong doing. I truly believe that a good system, strong corporate governance and an influential leadership must work hand in hand. They are equally important in ensuring ethical and socially responsible conduct. Taking Starbucks and Tata Group as examples, they have been considered as few of the most ethical companies. They have relentlessly pursued, implemented and improved their governance system which facilitates ethical and social responsibility. Starbucks had always maintained that their coffee be traded fairly and the fair trade logo can be seen on most of their coffee products which they have sourced and purchased, highlighting their ethically and socially responsibilities. Starbucks implemented a long-term equity holding rule for their senior management as part of their corporate governance to ensure that the senior managements interests are aligned with the companys. By doing so, Starbucks has limited the probability of rogue managements who may seek to gain short term gains. Tata Steel Ltd has their own form of corporate governance via their ethical code of conduct and whistle blowing channel which are implemented throughout all its business units. They have also

strived to ensure it is being communicated efficiently and effectively across all barriers, be it geographical or language. These are all evidences of a robust system that is put in place to ensure employees know, understand and conform to the companys desired ethical values and principles. However, good systems and corporate governance can only do so much. Ultimately, the leader carries an important role in promoting and strengthening of the companys ethical values, ensuring these values grow into the culture and legacy of the company. Cyprus Pallonji Mistry and Howard Schulz, CEOs of Tata Group and Starbucks respectively have certainly played big roles in strengthening the companys ethical culture. It is therefore important that a leader champions these principles through continued personal engagement and dialogues (Crane et al. 2008). Without a doubt, good leadership provides the foundation to cultivate good ethical culture, while systems and corporate governance are complementary. The altruism of a companys practices lies solely in the hands of the leader. Take for example, the reporting of Environmental, Social and Governance by companies. These usually covers the local activities of a companys business while more often than none, it is the overseas businesses which are not reported which could have a hidden agenda. I am sure the CEO is the one who decide what is to be reported and what is not to be reported. The true intentions of the company thus lie with the leader. The leader is thus at the very top of the pinnacle, supported by its systems and corporate governances. In a nutshell, Leadership, System and corporate Governance (LSG) are essential for the growth and sustenance of a companys ethical system. That being said, LSG will differ between companies due to differences in boundary conditions. They must be taken into consideration for different companies. I believe that Lawrence Kohlbergs Theory of Cognitive Moral Development (CMD) (Kohlberg, 1969) can be used to describe the progressive Ethical Journey which companies partake.

The Theory of Cognitive Moral Development explained that individuals progress through six developmental stages of moral reasoning and the six stages are further categorized into three levels, namely Pre-conventional, Conventional and Post-conventional. The three levels are as follow: The Pre-conventional level, actions based on its consequences; the Conventional level, actions based on societal norms and expectations; the Postconventional level, autonomous decisions and actions based on personal ethical principles rather than social norms. The theory of CMD had not only helped in an individuals moral development, it has also helped to influence and shaped its applications on business ethics models too. Fraedrich, Thorne and Ferrell (1994) had concluded that the fundamentals of all ethical decision-making models in business are based on CMD theory. I thus believe that corporations also go through the six CMD stages in their Ethical Journey. As a company grows, it will operate at different CMD stages depending on its growth. It is also imperative that at different stages, different emphasis will be placed on leadership and systems and corporate governance. The idea of the Ethical Journey is that the ethical development of a company progresses through different phases of growth via time and at different phases, a strong leadership is needed whilst in others, good systems and governance is more important. The Ethical Journey can be broadly categorized into 3 categories. Companies who are doing wrong by Law, judged by the legal system, example of which is Enron, companies who are beyond the Ethical/Social Norms as judged by society, examples of which are Tata Group and Starbucks and companies who are caught between the law and Ethical/Social Norms. Companies who are beyond the Ethical/Social Norms are at the Post-conventional level where they have grown to be able to decide ethically on moral dilemmas based on their own principles and beliefs laid out by their systems and corporate governance. Companies who are on the wrong side of the law must definitely have a change in leadership who can better

improve the ethical values whilst companies who are sandwiched in between the law and Ethical/Social Norms are in the Pre-conventional and Conventional levels. These companies are constantly improving themselves in terms of getting a better leader or having better corporate governance which can move the company beyond the Ethical/Social Norms. The key assertion is that companies require leadership, system and corporate governance and LSG are mutually dependent. Look at Natsteel, the leaders provide strong support to their whistle-blower system which is robust to deter and detect and wrong doings as highlighted by their experience with a rogue metal supplier. Companies may emphasize on leadership when leaders have control and influence over the entire company. The size of the firm thus matters and is a boundary condition which influences how much companies can stress on leadership without system and corporate governance to deter and detect wrong doings. There is only so much a charismatic leader can influence his or her management. Larger companies which have many sub divisions will be too far-fetched for the leader to exert his influence. We can therefore say that leadership focus is typically more prominent in small firms, an example is Eighteen Chefs. Mr. Benny Se Teo, the owner of Eighteen Chefs. Mr. Teo not only imparts culinary knowledge but also guides and teaches life skills to them. The need for a good system and corporate governance may not be as efficient when cultivating ethical practices to his employees as these employees require a personal touch. Larger companies on the other hand require systems and corporate governance to inform and cultivate ethical values through the business units within the organization. As mentioned, a leader cannot be possibly reaching out to all business units especially so when the business units are international. This would mean that continued improvements must be enhanced in order for the system and corporate governance to remain sound. Loopholes will certainly appear over time; there is thus must be a continued drive towards improvement, beyond the Ethical/Social Norms. In the case of NKF, whilst the leaders intentions may be wrong, NKF

should have improved their system and corporate governance whereby two or more members of the senior management should approve contract which are worth above a certain threshold value instead of enabling sole decision to the CEO. It is almost certain that as globalization occurs, people will look for ways to beat the governance system, the company must thus continually improve their governance system, making it dynamically robust to deter and detect individual and corporate wrong doings. To put into context that leadership, systems and corporate evolve as companies grow, and different emphasis is placed in different stages, we take a look at Tata Group. The foundation of their success lies in their background which started off as a philanthropic group. As the company grows, its leaders exert strong values and influenced the senior management which grows into the entire company. As Tata group further develops and ventures overseas, it has set up a comprehensive system and corporate governance which is translated into different languages to be used universally across all its business units. We clearly see how Tata group emphasizes on leadership, systems and corporate governance at different stages of its Ethical Journey as it grows. Tata group have even gone beyond the Ethical/Social Norms. Along with strong leadership, they have a robust system and corporate governance which is inbuilt into its culture. Tata group is able to achieve sustainability in its ethical practices whilst employees are aware of the importance of ethics in the company which will certainly sieve out any wrong doings within the company. There are however potential roadblocks that could hinder a company with strong leadership, good system and corporate governance from deterring and detecting any wrong doings. As companies grow internationally, ethical relativism comes into play. It will have an effect on the companies operation across different countries or cultures, especially so in a country where the rule of law is weak and ethical boundaries arent clear. The school of

ethical relativism states that the difference in beliefs, customs, norms and cultures across countries will give rise to multiple sets of ethical standards on what is right or wrong. The key is not only to have a strong leadership, sound corporate governance and solid system which lays the foundation on the right thing to do but also to adjust accordingly in different cultures and regions just as Tata group had done so which in turn, Natsteel reinvents its system and corporate governance to better suit the environment in order to deter and detect any wrong doings. There is also the problem which globalization carries along. Leaders come and go all the time, the change in helm at the top will certainly determine the direction the company grows in. What happens if the incoming CEO is not exerting its influence strong enough? As M&A occurs, the parent company is more focused on profits and may not have a strong system or corporate governance which the acquired company has. This would certainly ensure the failure of the entire corporate governance which the acquired company has built up from the start. Clearly, even with good leaders, good systems and corporate governance in place, changes in leadership and M&A activities will alter the complexion of the companys system and corporate governance. It is without a doubt that leadership, system and corporate governance are all equally important to deter and detect any wrong doings. Whilst LSG are inter-dependent, good leadership provides the foundation of ethics, coupled with the right principles and beliefs, good systems and corporate governance acts as complements to the strong leadership. Depending on the context and boundary conditions based on the stage of companies growth, some companies have to place more emphasis on either leadership or governance system. Companies which have established their LSG must continue to do so and cultivate it as a habit or culture which will co-exist with the companies vision. Lastly, though LSG may be

well established in companies, potential roadblocks might still hinder a companys effort to sieve out wrong doings. However with a strong leadership, continued improvements in the legal system, continued strengthening of LSG, any continued wrong doings will not survive the test of time. (1995 words)

REFERENCES Andrew Crane & Dirk Matten. (2010). Business Ethics: Managing Corporate Citizenship and Sustainability an the Age of Globalization: 92-137. Crane, A. & Spence, L. (2008). Competitive intelligence: ethical challenges and good practice, London: Institute of Business Ethics. Kohlberg, L. (1969). Stage and sequence: the cognitive moral development approach to socialization. In D. Goslin (ed.), Handbook of socialization theory and research: 347-80. Chicago: Rand McNally. Fraedrich, J., Thorne, D.M., and Ferell, O.C. (1994). Assessing the application of cognitive moral development to business ethics. Journal of Business Ethics, 13 (10): 829-38.