Professional Documents
Culture Documents
Access to this document was granted through an Emerald subscription provided by emerald-srm:397875 []
For Authors
If you would like to write for this, or any other Emerald publication, then please use our Emerald for
Authors service information about how to choose which publication to write for and submission guidelines
are available for all. Please visit www.emeraldinsight.com/authors for more information.
About Emerald www.emeraldinsight.com
Emerald is a global publisher linking research and practice to the benefit of society. The company
manages a portfolio of more than 290 journals and over 2,350 books and book series volumes, as well as
providing an extensive range of online products and additional customer resources and services.
Emerald is both COUNTER 4 and TRANSFER compliant. The organization is a partner of the Committee
on Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative for digital archive
preservation.
JITLP
9,3 International business ethics
Ben Tran
Marshall Goldsmith School of Management,
Alliant International University, San Francisco, California, USA
236
Abstract
Purpose While international corporate unethical behaviors seem to permeate uncontrollably, it is
nevertheless, not an incurable dilemma. The paper aims to address the key steps in achieving such
governance: chief ethics officer, tone-at-the-top, and whistle-blower hotlines. With that said, this paper
will also address the value of unethical behavior, both from a macro and a micro perspective.
Downloaded by National University of Singapore At 19:48 01 February 2016 (PT)
Introduction
Crime, fraud, and corruption, according to Tran (2008), are all nouns that pertain to the
act of deception that depicts an intention to increase an opportunity in ones favor in an
unlawful manner that pertains to an organizations interest and goals. These crimes
(offenses or corruptions to be exact) are nothing new to the corporation. Such crimes are
numerous and quite costly and are now commonplace in corporations (Adler and
Lord, 1991; Baker and Faulkner, 1993; Bacus and Near, 1991; Calavita and Pontell, 1991,
1994; Clinard and Yeager, 1980; Clinard et al., 1979; Jamieson, 1994; Mokhiber, 1988;
Preze, 1978; Pontell and Calavita, 1993; Reichman, 1993; Ross, 1992; Simpson, 1986, 1987;
Staw and Szwajkowski, 1975; Yeager, 1987, 1993). Gottfredson and Hirschi (1990)
definition of crime, according to Reed and Yeager (1996), is the use of force or fraud in the
perpetrators self-interest.
According to Shover and Hochstetler (2002), on the other hand, crime is behavior that
violates criminal statutes, regardless of whether or not it becomes known or responded to
by criminal, civil, or administrative state agencies. Crime is behavior that is potentially
sanctionable by agencies of criminal justice. Historically, investigations of crime focused
Journal of International Trade Law predominantly on individuals and their misdeeds, and investigators by contrast were
and Policy slow to recognize and to take seriously the fact that a great deal of crime is organizational
Vol. 9 No. 3, 2010
pp. 236-255 in nature. Organizational crime is crime committed by officers, managers, or employees
q Emerald Group Publishing Limited
1477-0024
of legitimate formal organizations in furtherance of their conception, however farfetched
DOI 10.1108/14770021011075491 or erroneous, of organizational interest and goals (Shover and Hochstetler, 2002).
Sutherland (1945, p. 9) defined [corporate] crime as [. . .] committed by a person of International
responsibility and high social status in the course of his occupation. Among the various business ethics
definitions of the term, the practicality of it remains as archival antique information,
rhetorically appealing but insignificant to even be an elective course in business
programs. Nevertheless, practitioners must overlook its taboo reputation and embrace
the probability of its destructions if they choose to glance at it. Denial is no longer an
effective strategy. The existences of crime and its destructions are not a myth and are not 237
a theory, for its presentences (existences and its destructions) are made known both
domestically and internationally. For example, Enron Corporation in Houston, Texas,
USA, was convicted in 2001, and Seecon in Concord, California, USA in 2010, where
boxes of documents were confiscated in suspicion of white-collar crime.
Downloaded by National University of Singapore At 19:48 01 February 2016 (PT)
clusters of finance, labor markets/human capital, tax regime, and infrastructure also
pose significant obstacles in many countries, they lag far behind the governance cluster.
On the other extreme end of the spectrum, the macroeconomic policy cluster, represented
by foreign exchange regulations and macroeconomic instability/inflation, no longer
figures as a priority constraint to the enterprise sector[2].
The World Economic Forums Growth Competitiveness Index (GCI), which rates the
relative competitiveness of all EOS countries, has been one of the key contributions of
the Global Corruption Report over the years. There are several ways to analyze the
possible key determinants of country competitiveness, as measured by the GCI, but any
viable analysis would have to account for the pitfalls of confusing simple association
with clear causality, or of equating fundamental determinants of competitiveness with
an observed empirical link between the GCI and current variables, which may simply
reflect a quasi-tautology. The latter is because the GCI is, in itself, a composite of many
current EOS and external variables. Thus, we see that a high correlation between the
GCI and the EOS data on the extent of access to the internet in schools, the likelihood of
recession this coming year, or the frequency of bribes for tax payments would not be
very informative, because those variables are explicit inputs into the calculation of the
GCI subindices in the first place (information and communication technologies,
macroeconomic stability and public institutions, respectively).
years, according to Roy Snell, the organizations CEO. Ten years ago, it was very, very
rare to hear about a CEO position, says Julie Goldberg, a senior client partner with
executive search firm Korn/Ferry. Today, more and more companies are creating
the role.
It is a requirement for good governance, says Odell Guyton, who has been director of
compliance at Microsoft since 2001. He says the position allows him to ask tough
questions. Just because youve done something that way for 20 years, that doesnt mean
its the way you do it today, he says. While critics say everyone at a firm should be
responsible for ethics, Guyton says a point person is necessary. How are you going to
make sure its being done, when people have other core responsibilities? Guyton says.
That doesnt mean its on the shoulders of the compliance person alone.
With that said, according to Gross (2003), Nancy Higgins became Microwave
Communications, Inc.s (MCI) Executive Vice President of Ethics and Business
Conduct and CEO, reporting to MCI Chairman and CEO Michael Capellas. Capellas
appointed an interim CEO in January after he took over the company in November,
but Higgins is the first permanent CEO at MCI, still officially named WorldCom.
David (Dave) Heller was appointed Chief Ethics and Compliance Officer for Qwest in
December 2002. He is responsible for ethics, corporate and regulatory compliance,
security, disaster preparedness, claims, environmental affairs, safety and industrial
hygiene and risk finance and insurance (Qwest, 2008). In 2003, Harold J. Tinkler
became the first Chief Ethics and Compliance Officer for Deloitte & Touche USA LLP
(Deloitte & Touche, USA) and its US subsidiaries (the Deloitte US Firms) (Deloitte,
LLP, 2008).
According to Gebler (2007), ethics officers need to be more precise in their practice.
Todays ethics officer needs to be very clear in distinguishing their ethics
responsibilities from their compliance responsibilities. The need for compliance is of
course, ongoing. Employees and managers need to be made aware of the standards of
behavior they are expected to follow and organizations must have robust processes to
permit employee concerns to be communicated and investigated. But that is not
ethics. Ethics must be the discipline of helping managers and leaders create the
culture where raising issues is safe, as well as socially acceptable, and where
frustrations stemming from todays business pressures can be safely vented. Helping
organizations first assess cultural vulnerabilities and then coordinate functional leaders
in communication and training to address these issues is the most valuable role an
ethics officer can play.
JITLP The role of business ethics as a distinct discipline is changing rapidly in todays work
9,3 environment. It was only a few years ago that ethics officers were building ethics
departments within their companies to manage integrated investigations,
communications, and training. Today, with the focus on building ethical cultures,
ethics officers are seeing the need to influence key business practices that go far beyond
awareness of code standards and corporate values. There is a challenging paradox in
242 that the successful ethics officer of tomorrow will be the one that has the
smallest organizational footprint. Their success will be in having other functions,
such as organizational development, organizational psychologist, human resources, and
communications, be successful.
According to Gebler (2007), The latest issue of Ethikos, an industry newsletter, looked
back over the last 20 years of business ethics. There certainly have been tremendous
Downloaded by National University of Singapore At 19:48 01 February 2016 (PT)
gains in terms of awareness of ethics issues as well the deployment of key program
elements such as helplines, codes, and training. However, several veteran ethics
professionals expressed concerns that over 20 years, the ethics movement has
not succeeded in actually inculcating responsible behavior in business people.
As Lori Tansey Martens said, we have not really stepped up to the challenge of creating
that still elusive (and not always defined) culture of ethics.
Tone-at-the-top: CECO/CEO
An organization sends an important message about the priority of ethics and compliance
to leadership by the way the functions appear on an organizational chart. A CECO as a
formal part of an executive level team gives a strong indication that ethics not only
begins at the top, but also that the ethics and compliance-related interests of the
organization are intentionally represented in high-level business decisions. By contrast,
CEOs may actively talk about the fact that ethical conduct is important, but if the next
highest official working with the ethics and compliance area is found several levels
down on the organizational chart, a less persuasive argument can be made that ethics
and compliance really matter.
While several characteristics of the job description are common among CECOs who are
effective in their organizations, in practice every organization must define the role of the
CECO according to its particular needs and culture. Recognizing the need to strike a
balance, we suggest a set of basic definition about the role of the CECO. The designated
high-level official within a corporation should be expected to assume a broad and
substantial position which is outlined in the Ethics Resource Center (2007, pp. 17-19).
Selection of chief ethics officer International
All Board of Directors of a corporation should have a substantial majority of directors business ethics
who meet the criteria for independence required by the Statement of Policy of Director
Independence Standards adopted by the Board. In determining independence, the Board
will broadly consider all relevant facts and circumstances, including the commercial,
industrial, banking, consulting, legal, accounting, charitable, and familial relationships
that a director has with the corporation. The Nominating and Governance Committee is 243
responsible for reviewing with the Board the requisite skills and characteristics for
Board members, as well as the composition of the Board as a whole. In assessing possible
candidates for nomination to the Board, the Nominating and Governance Committee will
consider the background, experience, skills, character and successfulness of the
individual in chosen field, background in public companies, geographic diversity, and
Downloaded by National University of Singapore At 19:48 01 February 2016 (PT)
.
help provide shelter from severe sanctions in the event of legal/regulatory
difficulty;
.
contribute to the establishment of an enduring ethical culture;
.
help other corporate leaders prevent misconduct or effectively address it when it
occurs; and
.
provide a public demonstration of the organizations commitment to integrity.
The cornerstone: a clearly defined role. To truly be a value-added function, the CEO
must have a well-defined role and be endowed with adequate resources. This demands
a balance between tailoring the job to an organizations unique characteristics and
providing the CEO with the basic authority and tools that should be universal for all
who hold such positions. At minimum, a CEO should be:
.
held accountable to the governing authority while carrying out its delegated
fiduciary responsibilities;
.
independent to raise matters of concern without fear of reprisal or a conflict of
interest;
. connected to company operations in order to build and ethical culture that
advances the overall objectives of the business;
.
given the authority to have decisions and recommendations taken seriously at all
levels of the organization; and
.
the CEO also must have the financial and human resources necessary to
comprehensively promote standards, educate the workforce, and respond to
potential violations in a timely manner.
Responsibilities: being a full member of the executive team. A CEO should be a full
member of executive leadership and expected to:
.
oversee assessment of organizational risk for misconduct and noncompliance; 245
.
establish organizational objectives for ethics and compliance;
.
manage the organizations entire ethics and compliance program;
.
implement initiatives to foster an ethical culture throughout the organization;
.
supervise ethics and compliance staff embedded throughout the organization;
Downloaded by National University of Singapore At 19:48 01 February 2016 (PT)
.
frequently, inform the board of directors and senior management team of risks,
incidents, initiatives driven by the ethics and compliance program, and progress
toward program goals;
.
implement a program of measurement to monitor performance; and
.
oversee periodic measurements of program effectiveness.
Personal qualifications: knowledge, skills, abilities, and integrity. Like any other member
of the senior executive team, a CEO should enter the position with certain knowledge
and skills, including:
.
management experience;
.
ability to work at the executive level;
.
knowledge of business;
.
knowledge of and passion for ethical conduct and compliance; and
.
strong personal character and a commitment to integrity.
The CEOs special role: professional development and responsibility to the field. Beyond
their daily duties, CEOs have a responsibility to themselves and to the broader ethics
and compliance field. As executives, CEOs should consider themselves accountable to
a standard of conduct equal to that imposed upon other executives, the board, the
broader public, and to CEO peers. As a result, CEOs must:
.
demand a high standard of conduct from vendors, non-governmental
organizations, and others providing ethics and compliance-related services;
.
take responsibility for the preparation of rising CEOs and other ethics and
compliance professionals; and
. advance knowledge and shape public dialogue about ethics and compliance.
Conclusion: the CEO role continues to evolve. Infusing and maintaining the highest
ethical standards across the extended enterprise are among the most important job
responsibilities in corporations today. The role of the CECO has emerged in response to the
demand for a more accountable, transparent, and ethical business culture, and the creation
of CEO positions across industries is testimony to corporate leaders recognition of the
importance of ethics and compliance in assuring their companies success and longevity.
Still, many executives and boards have not yet realized the potential of their CEOs,
JITLP in some cases by not providing adequate resources or authority to those holding the
9,3 position. This report further defines the CEO role and demonstrates its critical value to an
organization. Properly constituted, the CEO investment is always worthwhile because,
in the end, ethical conduct is a key ingredient in building and sustaining investor and
stakeholder trust and in protecting society from organizational misconduct.
establish procedures for the receipt, investigation and reporting of complaints and
allegations of wrongdoing, including anonymous mechanisms for the receipt of
complaints and allegations. Although there is no similar, broad legislation for
non-publicly traded organizations such as privately held companies, municipalities and
not-for-profit organizations, many leading organizations in these sectors are voluntarily
reviewing their practices around complaints and allegations of wrongdoing. In many
cases, organizations have proactively implemented policy enhancements similar to the
legislated provisions as a matter of good governance.
A whistle-blower is generally defined as a person who calls attention to a
questionable or illicit activity in an attempt to have it brought to an end (Canadian
Oxford Dictionary, 2004). A whistle-blower can also be defined as employees who expose
corruption or wrongdoing on the part of an employer. However, there is an overall lack of
consistency in the definition of whistle-blowing and the key elements of a
whistle-blower program. In part, this would appear to result from the fact that much of
the recent activity and importance ascribed to whistle-blowing is legislatively driven.
As such, much of the activity is directed towards compliance with the specific legislation
applicable to the organization. For purposes of this paper, the term whistle-blower
program is used to refer collectively to all policies, procedures, and processes within an
organization that address issues related to questionable activities, fraud, misconduct,
and other wrongdoing.
Since employers engaged in illegal activity are interested in avoiding exposure,
employees who threaten to contact the authorities or who alert upper management are
often subject to harassment, intimidation, or the loss of their job. To help encourage
these whistle-blowers ethicalness, avoid threats, reputable companies need to setup
whistle-blower hotlines. This process is just an important part of the companys
corporate governance process.
For example, Treisman (2000) finds that countries with lower corporate corruption
tend to be largely Protestant, former British colonies, have higher per capita income, a
common law (versus civil law) legal system, a high ratio of imports to gross domestic
product, long exposure to democracy, and a unitary form of government. Other related
studies document similar findings.
Studies aimed at assessing the economic impact of corporate corruption have
documented country level associations between it and a variety of social or economic
ailments. For example, Mauro (1995) shows that corporate corruption lowers
investment, and impedes economic growth while an increase in corporate corruption
lowers the amount of direct foreign investment. Corporate corruption is also associated
with reduced government tax revenue (Ul-Haque and Sahay, 1996; Tanzi and Davoodi,
1997; Johnson et al., 1999), decreased spending on operations and maintenance, such as
medicine and textbooks (Tanzi and Davoodi, 1997), increased military spending
(Gupa et al., 2000), higher child mortality rates and student dropout rates (Gupa et al.,
2001), as well as a larger unofficial economy (Johnson et al., 1998).
Although these studies have helped us to better understand the pervasive nature of
corruption, they provide little evidence on its implications for shareholder value. In two
studies that are closer in spirit, Ciocchini et al. (2003) and Hall and Yago (2000) find that
more corrupt countries have higher relative spread on their sovereign bonds. Their
evidence hints at the possibility that the cost of equity capital could be higher as well in
more corrupt countries.
market but can invest in foreign markets. The asset demands of foreign investors are
identified by a subscript f.
Based on Lee and Ngs (2004) equation, in this setting, l proxies for international
integration, where l 0 implies no international investment in the home market, and
l 1 implies perfect integration. The rate of return on home equity Rh has a mean of
(1 mh) and a standard deviation of sh, while the rate of return on the equity on the
world portfolio Rw has a mean of (1 mw) and a standard deviation of sw.
The covariance between the two returns is shw. The portfolio choice problem of the
representative type j investor (where j h, g, and f stand for home investor, global
investor, and foreign non-global investor, respectively) involves maximizing the
following objective function:
b
M X hj aX wj xEW 1j 2 varW 1j 2 cxhj 1
2
where 1 j W is the value of investor js terminal wealth, hj x and wj x are the amounts he
invests in the home and the world market, b is a risk aversion parameter, and c is the cost
associated with higher corruption in the home market. In this model, market clearing
conditions[3] lead to a required return on equity with four terms:
s2 xh
mh r c b s2h 2 hw 2
bh mw 2 r 2
sw N h lN w
where bh shw s2w is the home country beta relative to the world market.
The first term in equation (2) is the risk-free rate. The second is the cost of corruption.
The third term captures the effect of integration on the cost of capital. Specifically, it is a
function of the supply of equity funding to domestic companies, hX, and of the
home countrys own variance and covariance with the world stock market:
Xh
0
Nh Nw
The fourth term is the home country beta multiplied by the world market risk premium.
Notice that so long as some foreign investors are able to invest in the home market
(l . 0), as the number of foreign investors increases, the equity risk that each investor
bears becomes smaller. If the number of foreign investors wN becomes arbitrarily large
relative to the funding to domestic companies, then X h =N h N w 0. In other words,
as world markets become fully integrated, the supply of equity becomes perfectly elastic International
and the second term approaches zero, thus lowering the cost of capital. business ethics
However, because the cost of corruption is essentially a transaction cost, it is
unaffected by the degree of diversification with world markets. Even in the case of
complete integration, the cost of corruption, c, still increases the required rate of return.
As corruption cost is lowered, the required rate of return is also reduced. Several other
academic studies lend support to our basic premise that transaction costs can affect 249
expected rates of return. For example, Amihud and Mendelson (1986) find that firms
with higher bid-ask spreads are associated with higher required rates of return in the
USA Easley and OHara (2004) model the effect of information asymmetry risk on asset
prices and show that this risk can remain undiversified in equilibrium. More recently,
two empirical studies using international data also find corroborating evidence.
Downloaded by National University of Singapore At 19:48 01 February 2016 (PT)
Specifically, failure to enforce insider trading laws (Bhattacharya and Daouk, 2002) and
elevated levels of earnings opacity (Bhattacharya et al., 2003) are both found to be
associated with higher costs of equity capital across countries. In all these instances, the
evidence indicates that higher contracting costs are reflected in higher costs of capital.
Also consistent with this basic argument, according to Lee and Ng (2004) and
La Porta et al. (2001) show that firms from countries with better investor protection laws
have higher Tobins q. Their study uses the origin of a countrys laws (Common versus
Civil) and the index of specific legal rules as indicators of shareholder protection.
As mentioned earlier, the origin of a countrys law is correlated with corruption. It is
difficult to distinguish whether corruption per se, or shareholder protection, is the
primary theoretical construct that accounts for the results in La Porta et al. (2001). This
issue is addressed by including the LLSV index of shareholder protection (Antidir), the
efficiency of the judicial system (Judsys), and the level of accounting standards
(Accstand) as control variables. In sum, corruption encompasses a broader set of social
behavior than is captured by shareholder protection. For example, public corruption is
likely to be mirrored by similar behavior in the private sector. To the extent that unethical
behavior in general increases contracting and monitoring costs, the adverse effect of
corruption on corporate values will extend beyond legal protection of shareholders.
P 1C P 1B
Bu $ P 1 PE ;
250 C
where Bu is the actual benefit of the unethical behavior, the P1 C is the probability of the
consequences, the P1B is the probability of the benefit, and the C is the actual
consequences. The P1(PE) is the probability of a postal employee. Thus, the actual
benefit of the unethical behavior must be greater than or equal to, the sum of the
Downloaded by National University of Singapore At 19:48 01 February 2016 (PT)
probability of the consequences and the probability of the benefit, compared to the
actual consequences. The equation is based on four factors: Bu, P1 C, P1B, C, and
P1(PE), and it has two exceptions.
Actual benefit of the unethical behavior (Bu). The actual benefit of the unethical
behavior (Bu) is very individualized, thus subjective, quite rhetorical, and sometime
defies logic. Nevertheless, it is usually due to financial gain, survival of the fittest, or
discrepancy. While financial gain and discrepancy are self explanatory, survival of the
fittest is a phrase which is a short hand for a concept relating to competition for survival
or predominance. The concept was original applied by Herbert Spencer in his Principle
of Biology in 1864. Spencer drew parallels to his ideas of economics with Charles
Darwins theories of evolution by what Darwin termed natural selection (Wikipedia,
2007).
However, there are two exceptions to the Bu equation, educational skills (ES) and
career ladder (CL). ES refers to the necessary skills and training that are required from
the individual from becoming a perpetrator. For example, a Certified Public
Accountant license for an Accountant, a Marriage Family Therapy license for a
Therapist/Counselor, a State Bar Examination for an attorney, and the Architectural
Registration Examine for an Architect, or related education and skills. Individuals who
lack such ES are more likely to become a perpetrator of unethical behavior since they
are more likely to encounter barriers, be held by, and are disgruntled with their
employer due to a lack of disagreement on the vision of their future career path.
As such, the values of the benefits of the unethical behavior, due to ES, are
ES . Bu $ P 1 C P 1 B=C.
The second exception to the Bu equation is CL. CL refers to the opportunity, or the lack
of opportunity, to excel on the CL. The lack of opportunity to excel on the CL may be due
to age, drive, or passion. Individuals who lack such CL are more likely to become a
perpetrator of unethical behavior since they are more likely to disconnect oneself
from the employer, estrange with the employer, and are disgruntled with the employer
due to a lack of disagreement on the vision of their future career path. As such, the values
of the benefits of the unethical behavior, due to CL, are CL . Bu $ P 1 C P 1 B=C.
Thus, the combination of the two exceptions is the receipt for disaster, an unethical
behavior waiting to take its course. Individuals who lack ES and CL are only out for
themselves without the consideration for others or the employer. ESCL to an employer
is like a kleptomaniac to a retail store. As such, the values of the benefits of the
unethical behavior, due to ESCL, given that ESCL . ES . Bu $ P 1 C P 1 B=C and
ESCL . CL . Bu $ P 1 C P 1 B=C, is ESCL . Bu $ P 1 C P 1 B=C.
Potential consequences (P1C) and potential benefits (P1B). Potential consequences International
(P1C) refers to the existing possibility of the consequences that the individual may business ethics
encounter, be affected by, and/or be penalized by if the unethical actions are to be
carried out and caught. Potential benefit (P1B) refers to the existing possibility of
the benefits that the individual may encounter, be affected by, and/or benefit from if the
unethical actions are to be carried out and not caught. The existing possibility of the
consequences and the existing possibility of benefits are very individualized and 251
cannot be judged nor compared by any other but the perpetrators for it defies logic.
Other variables that can contribute to the P1C includes industry, seniority, and
severalty of the unethical action.
Actual consequences (C). Actual consequences (C) refers to the consequences that the
individual will encounter, experience, and be penalized by if and when the perpetrator
Downloaded by National University of Singapore At 19:48 01 February 2016 (PT)
is caught with enacting the unethical action. The C is very individualized and cannot
be judged nor compared by any other but the perpetrator and the legality of it for it
defies logic. Other variables that can contribute to the C include the industry, seniority,
and severalty of the unethical action. The probability that diminishes the value of the C
is the probability of P1C more than C, and definitely the increased probability of P1B
over both P1C and C combined.
Postal employees [P1(PE)]. P1 refers to the probability of postal employee PE. There
are two different types of PE. The first type of PE is PEESCL, PEESCL are the ones who
have the ES, and are on the CL. Nevertheless, there exist two types of conflict between the
employer and the PE, conflict that estranged the PE. A disgruntle between the employer
and the PE, due to a lack of disagreement on the vision of the PE future career path, or
that fresh talents outshined the PE. The second type of PEESCL are the ones who do not
have the ES, nor on the CL, but wanted to be on the CL. Thus, a disgruntlement between
the employer and the PE arises, due to a lack of disagreement on the vision of the PE
future career path. The P1(PE) is based on the PE due to PEESCL.
When the supervisor believes an employee is a PEESCL and has the P1(PE) of doing
something unethical, the supervisor should take immediate action. First, the supervisor
should be proactive and not reactive, and need to gather and record evidence. Then the
supervisor addresses the employee with the evidence and follows the organizations
disciplinary procedure. After dealing with a specific problem, the supervisor should try
to understand what conditions contributed to the problem and then seek to correct
those conditions.
Values of the unethical behavior (Bu). The actual benefit of the unethical behavior
(Bu) is very individualized, thus subjective, quite rhetorical, and sometime defies logic.
Nevertheless, it is usually due to financial gain, survival of the fittest, or discrepancy.
As such, the projected benefit of the unethical behavior is often due to survival of
the fittest and discrepancy, and such individual is like a chameleon. Like a chameleon,
the individual is among others, functioning alongside the employer, but without the
respect for boundaries and ethics.
The sole purpose of the P1, like a chameleon, is survival of the fittest. The P1 will only
reveal its true color when felt threatened. The threat varies and may not necessarily be
logical. Example of a threat is new and fresh talent who possesses ESCL to. As such, the
P1 cannot be in position of power and authority over new ESCL, nor be in the position of
and related to the Milgram experiment with new ESCL. The P1 will utilize the
opportunity and manifest its P1.
JITLP Conclusion
9,3 While international corporate unethical behaviors seem to permanents uncontrollable,
it is nevertheless, not an incurable dilemma. However, when international corporations
consciously decide not to address the issue and handle it, then these international
corporations have decided not to resolve the dilemma. An issue becomes a dilemma
when an issue is not addressed. A dilemma becomes an incurable dilemma when the
252 dilemma is not resolved. One of the greatest challenges, in resolving this dilemma, for
international corporations, are establishing a set of tone that involves more than the
board of directors and senior management, but every employee within the corporation.
Another greatest challenges, in resolving this dilemma, for international corporations is
that corporations often do not take the importance of CEO as paramount as needed but
only as a fade. Along with these challenges, a key compliance challenge is creating an
Downloaded by National University of Singapore At 19:48 01 February 2016 (PT)
Notes
1. Lee and Ngs (2004) manuscript have also mentioned this information and the OECD
web site is www.oecd.org/home/0,2987,en_2649_201185_1_1_1_1_1,00.html
2. The fact that firms do not single out as high-priority obstacles related to the foreign exchange
regime or inflation do not necessarily mean an absence of global macroeconomic challenges,
illustrated by the potential global dangers and costs which may be projected into future
years posed by the current twin fiscal and balance-of-payment deficits in the USA.
3. See Appendix A, Details of model derivation on pp. 31-2 of Lee and Ng (2004).
References
Adler, R. and Lord, C. (1991), Environmental crimes: raising the stakes, George Washington
Law Review, Vol. 59, pp. 781-861.
American Lawyer Magazine (2008), Corporate fraud data base, available at: www.law.com/jsp/ihc/
PubArticleIHC.jsp?id1193821435642 (accessed May 6, 2008).
Amihud, Y. and Mendelson, H. (1986), Asset pricing and the bid-ask spread, Journal of
Financial Economics, Vol. 17, pp. 223-49.
Bacus, M.S. and Near, J.P. (1991), Can illegal corporate behavior be predicted? An event history
analysis, The Academy of Management Journal, Vol. 34, pp. 9-36.
Baker, W.E. and Faulkner, R.R. (1993), The social organization of conspiracy in the heavy
electrical equipment industry, American Sociological Review, Vol. 58, pp. 837-60.
Baumhart, R.C. (1961), How ethical are businessmen?, Harvard Business Review, Vol. 39, pp. 6-19.
Bhattacharya, U. and Daouk, H. (2002), The world price of insider trading, Journal of Finance,
Vol. 57, pp. 75-108.
Bhattacharya, U., Daouk, H. and Welker, M. (2003), The world pricing of earnings opacity,
Accounting Review, Vol. 78, pp. 641-78.
Brenner, S.N. and Molander, E.A. (1977), Is the ethics of business changing?, Harvard Business International
Review, Vol. 55, pp. 59-70.
business ethics
Calavita, K. and Pontell, H.N. (1991), Other peoples money revisited: collective embezzlement
in the savings and loan and insurance industries, Social Problems, Vol. 38, pp. 94-112.
Calavita, K. and Pontell, H.N. (1994), The state and white-collar crime: saving the saving and
loans, Law & Society Review, Vol. 28, pp. 297-324.
Canadian Oxford Dictionary (2004), Edited by Katherine Barber, 2nd ed., Oxford University 253
Press, Oxford.
Ciocchini, F., Durbin, E. and Ng, D.T. (2003), Does corruption increases emerging market bond
spreads?, Journal of Economics and Business, Vol. 55, pp. 502-28.
Clark, H. (2006), Chief ethics officers: who needs them?, Forbes.com, available at: www.forbes.
Downloaded by National University of Singapore At 19:48 01 February 2016 (PT)
com/leadership/2006/10/23/leadership-ethics-hp-lead-govern-cx_hc_1023ethics.html
(accessed May 13, 2008).
Clinard, M.B. (1983), Corporate Ethics and Crime: The Role of Middle Management, Sage,
Beverly Hills, CA.
Clinard, M.B. and Yeager, P.C. (1980), Corporate Crime, The Free Press, New York, NY.
Clinard, M.B., Yeager, P.C., Brissette, J.M., Petrashek, D. and Harries, E. (1979), Illegal Corporate
Behavior, US Government Printing Office, Washington, DC.
Deloitte, LLP (2008), Meet Harold J. Tinkler: Chief Ethics and Compliance Officer, Deloitte & Touche,
LLP, New York, NY, available at: www.deloitte.com/dtt/employee_profile/0,1007,cid%
253D163822,00.html (accessed May 13, 2008).
Dougherty, C. (2007), Germany takes aim at corporate corruption, available at: www.iht.com/
articles/2007/02/14/business/scandal.php (accessed May 6, 2008).
Easley, D. and OHara, M. (2004), Information and the cost of capital, Journal of Finance, Vol. 59,
pp. 1553-83.
Ethics Resource Center (2007), Leading corporate integrity: defining the role of the chief ethics &
compliance officer (CECO), Chief Ethics & Compliance Officer (CECO) Definition
Working Group, available at: www.darden.virginia.edu/corporate-ethics/pdf/Leading_
Corporate_Integrity_Report.pdf (accessed May 13, 2008).
Gebler, D. (2007), The end of ethics? Going beyond compliance requirements, Working Values,
available at: http://accounting.smartpros.com/x58835.xml (accessed May 13, 2008).
Gottfredson, M.R. and Hirschi, T. (1990), A General Theory of Crime, Stanford University Press,
Stanford, CA.
Gowling Lafleur Henderson, LLP (2005), US-Canada cross-border corporate fraud, available at:
http://library.findlaw.com/2005/Jun/2/246678.html (accessed May 6, 2008).
Gross, G. (2003), MCI names chief ethics officer, IDG News Services, available at: http://archive.
thestandard.com/article.php?story792 (accessed May 13, 2008).
Gupa, S., Davoodi, H. and Tiongson, E. (2001), Corruption and the provision of health care and
education services, in Jain, A.K. (Ed.), The Political Economy of Corruption, Routledge,
New York, NY, pp. 111-4.
Gupa, S., de Mello, L. and Sharan, R. (2000), Corruption and military spending, IMF Working
Paper No. 00/23, International Monetary Fund, Washington, DC.
Hall, T. and Yago, G. (2000), Estimating the cost of opacity using sovereign bond spreads,
Policy Brief, Miliken Institute, Santa Monica, CA, April 3.
Jamieson, K.M. (1994), The Organization of Corporate Crime: Dynamics of Antitrust Violation,
Sage, Thousand Oaks, CA.
JITLP Johnson, S., Kaufmann, D. and Zoido-Lobaton, P. (1998), Regulatory discretion and the unofficial
economy, American Economic Review, Vol. 88, pp. 387-92.
9,3
Johnson, S., Kaufmann, D. and Zoido-Lobaton, P. (1999), Corruption, public finances, and the
unofficial economy, World Bank Policy Research Paper No. 2169, World Bank,
Washington, DC.
Kaufmann, D. (2003), Governance crossroad, in Cornelius, P., Schwab, K. and Porter, M.E. (Eds),
254 Global Competitiveness Report 2002-2003, Oxford University Press, New York, NY,
available at: www.worldbank.org/wbi/governance/pubs/rethink_gov.html (accessed
May 7, 2008).
Kaufmann, D. (2004), Corruption, governance and security: challenges for the rich countries and
the world, available at: http://mpra.ub.uni-muenchen.de/8207/ (accessed May 7, 2008).
Downloaded by National University of Singapore At 19:48 01 February 2016 (PT)
La Porta, R., Lopez-de-silanes, F., Shleifer, A. and Vishny, R.W. (2001), Investor protection and
corporate valuation, working paper, Harvard University and the University of Chicago,
Chicago, IL, May.
Lee, C.M. and Ng, D. (2004), Corruption and international valuation: does virtual pay?,
in progress, available at: www.socialinvest.org/pdf/research/Moskowitz/2003%
20Winning%20Paper%20-%20Moskowitz.pdf (accessed May 6, 2008).
McTaggart, T. (2006), Discussion paper: evaluating the current city of Calgary whistle-blower
program, Whistlerblower Program Discussion Program, available at: www.calgary.ca/
docgallery/bu/city_auditors/attach_1_2_whistleblower_program_discussion_paper.pdf
(accessed May 13, 2008).
Mauro, P. (1995), Corruption and growth, Quarterly Journal of Economics, Vol. 110, pp. 681-712.
Mokhiber, R. (1988), Corporate Crime and Violence: Big Business Power and Abuse of the Public
Trust, Sierra Club Books, San Francisco, CA.
Nader, R. and Green, K.J. (1972), Crimes in the suites: coddling the corporations, New Republic,
Vol. 4, p. 29.
Organization for Economic Co-operation and Development (2007), Corruption: a glossary of
international criminal standards, available at: www.oecd.org/department/0,3355,en_
2649_34855_1_1_1_1_1,00.html (accessed May 6, 2008).
Philp, M. (2001), Access, accountability and authority: corruption and the democratic process,
Crime, Law and Social Change, Vol. 4, p. 357.
Pontell, H.N. and Calavita, K. (1993), The savings and loan industry, in Tonry, M. and
Reiss, A.J. Jr (Eds), Beyond the Law: Crimes in Complex Organizations, University of
Chicago Press, Chicago, IL.
Preze, J. (1978), Corporate criminality: a study of the one thousand largest industries
corporations in the United States, unpublished PhD dissertation, University of
Pennsylvania, Philadelphia, PA.
Qwest (2008), Dave Heller: Chief Ethics and Compliance Officer, Vice President Risk
Management, Qwest, available at: www.qwest.com/about/company/management/dave_
heller.html (accessed May 13, 2008).
Reed, G.E. and Yeager, P.C. (1996), Organizational offending an neoclassical criminology:
challenging the reach of a general theory of crime, Criminology, Vol. 34 No. 3, pp. 357-83.
Reichman, N. (1993), Insider trading, in Tonry, M. and Reiss, A.J. Jr (Eds), Beyond the Law
Crime in Complex Organizations, University of Chicago Press, Chicago, IL.
Ross, I. (1992), Shady Business: Confronting Corporate Corruption, The Twentieth Century Fund
Press, New York, NY.
Shover, N. and Hochstetler, A. (2002), Cultural explanation and organizational crime, Crime, International
Law and Social Change, Vol. 37, pp. 1-18.
Silk, L.H. and Vogel, D. (1976), Ethics and Profits: The Crisis of Confidence in American Business,
business ethics
Simon & Schuster, New York, NY.
Simpson, S.S. (1986), The decomposition of antitrust, American Sociological Review, Vol. 51,
pp. 859-75.
Simpson, S.S. (1987), Cycles of illegality: antitrust violations in corporate America, Social 255
Forces, Vol. 65, pp. 943-63.
Staw, B.M. and Szwajkowski, E. (1975), The scarcity-munifience component of organizational
environments and the commission of illegal acts, Administrative Science Quarterly,
Vol. 20, pp. 345-54.
Sutherland, E.H. (1945), Is white collar crime crime?, American Sociological Review, Vol. 10,
Downloaded by National University of Singapore At 19:48 01 February 2016 (PT)
pp. 132-9.
Tanzi, V. and Davoodi, H. (1997), Corruption, public investment, and growth, IMF Working Paper,
97/139, International Monetary Fund, Washington, DC.
Tran, B. (2008), Corporate ethics: an end to the rhetorical interpretations of an endemic
corruption, Social Responsibility Journal: Ethics and Morality in Business Practice, Vol. 4
Nos 1/2, pp. 63-81.
Transparency International (2008), Statistical information about corruption, available at:
www.interpol.int/Public/corruption/conventions/Statistics.asp (accessed May 6, 2008).
Treisman, D. (2000), The causes of corruption: a cross-national study, Journal of Public
Economics, Vol. 76, pp. 399-457.
Ul-Haque, N. and Sahay, R. (1996), Do government wage cuts close budget deficits? Costs of
corruption, IMF Staff Papers, No. 43, International Monetary Fund, Washington, DC,
December, pp. 754-78.
Wikipedia (2007), Survival of the fittest, available at: http://en.wikipedia.org/wiki/Survival_of_
the_fittest
Wozniak, J.F. (2001), Assessing contemporary white collar crime textbooks: a review of common
themes and prospects for teaching, Journal of Criminal Justice Education, Vol. 12 No. 2,
pp. 455-77.
Yeager, P.C. (1987), Structural bias in regulatory law enforcement: the case of the US
environmental protection agency, Social Problems, Vol. 34, pp. 330-44.
Yeager, P.C. (1993), Industrial water pollution, in Tonry, M. and Reiss, A.J. Jr (Eds), Beyond
The Law: Crime in Complex Organizations, University of Chicago Press, Chicago, IL.