Profit and Principles Business Ethic in Hotel

8/6/2019 Profit and Principles Business Ethic in Hotel

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Australian Journal of Hospitality Management

Volume 7, Number 1, pages 113Copyright The Centre for Hospitality and Tourism

Management, The University of Queensland.

ISSN 13205161

Profit and Principles: Business Ethics in HotelManagement Companies in Asia

Paul ReynoldsSouthern Cross University

Abstract

When conducting business in Asia, manyhotel managers employed by companies

based in the West find that some of theircodes of ethical conduct inhibit fluidbusiness dealings.

Evidence from the recent collapses ofbusiness in the Philippines, Malaysia and

Indonesia shows that corruption,nepotism and bribery are commonoccurrences and are accepted as part of

general business life. It is also clear thatthese are not the only countries where

such practices are common. There is

much anecdotal and published evidenceof projects (including hotel projects),which have foundered or have beenrendered unprofitable or unmanageableby illicit and unlawful practices in China,Vietnam and Thailand.

This paper reviews how the dealingsof hotel companies are influenced bydifferent ethical standards in the countryof operation. Also examined are the

tensions created by conflicting codes ofethical conduct when operating in adifferent cultural environment and theimplications for management practicesand training. A report is made on anempirical study of a group of fourteenmanagers who work in eight internationalmultinational hotel companies (MHCs)in South-East Asia. The results endorse

some of the anecdotal material, whichsuggest that practices considered corrupt

by Western ethical standards are routinelypractised by MHCs operating in South-East Asia.

Keywords: Corruption, Ethics,Management, South-East Asia, Hotels,Human Resources

The Master said: Riches and rank are whatevery man craves; yet if the only way toobtain them goes against his principles, he

should desist from such a pursuit.(Lau, D.C.1979, p.4.5)


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Introduction

The following paper will review ethical tensionsexperienced by some expatriate hotel managers.These managers often work in countries withcodes of ethical practice different from thoseof their employer and their contemporaries. The

paper will review a range of literature dealingwith the topic and also report on an empiricalstudy where opinions were solicited from agroup of fourteen hotel managers, trained inWestern countries, who had working experiencein hotels in the Asia-Pacific region.

In the past thirty years, the tourism industryhas seen a proliferation of multinationalcorporations operating throughout the world.These companies are, for the most part, basedin Europe and the USA. They all have a

permanent force of professional managers whoare dispersed throughout the world to set upand manage their properties.

The rapid globalisation of the industry has brought forward the question of whetherhospitality and tourism operations can bemanaged in a uniform manner regardless of thecountry in which they operate. Can amultinational company apply uniform

personnel policies and procedures, and establishhomogeneous managerial practices in all theiroperations, or are these allowed to vary country

by country? Several authors have investigatedexpatriate managerial effectiveness (Richards1991; Yu and Pine 1994; Li and Tse 1998).

Globalisation of the business environmenthas created an increasingly complex set ofrelationships for the modern business manager.According to Hofstede (1993) the consequencesfor managerial practices resulting from culturaldifferences are numerous and significant. Ifthere is divergence between managerial orcorporate values and work practice values, thenthere are likely to be significant problems inmanaging the workforce. Values affect attitudesthat, in turn, affect behaviour. There cantherefore be a lack of congruence between amanagers personal values and her/his

behaviour at work. Such incongruence alsooccurs for the expatriate manager whencorporate values do not conform with workvalues in the country of operation. One suchlack of equilibrium is created by the presencein the operating country of what theorganisation would consider corrupt business

practice.

Corruption and Business Practice

In all countries, corruption does serious damageto the standards of public life, the institutionsof government, the cohesion of society and themanagement of the economy. It does particularharm to developing countries, where the

political fabric may be thinner, civic institutionsless firmly based and the economy more fragile.Corruption in a developing country is a heavy

burden on economic activity. It raises costs andblunts competitiveness. It distorts managementdecision making, making it more difficult, forexample, to gauge the exact consequences ofinvestment, spending, tax and regulatorydecisions.

In December 1998, the Convention onCombating Bribery of Foreign Public Officialsin International Business Transactions wassigned by the twenty-nine nations that make upthe Organisation of Economic Co-operation andDevelopment (OECD). This marked awatershed in the acceptance that bribery andcorruption are commonplace in international

business transactions, especially in lessdeveloped countries (LDCs).

On a lesser, but no less pervasive scale, thereare regular reports of officials in many countriesdemanding money for granting of all kinds of

permits, ranging from visas to buildingapplications. It is highly likely that managersof hospitality organisations operating in LDCswill come into contact with this level ofcorruption, along with bribery, nepotism andcronyism.

Nye (1967) describes corruption (bygovernment officials) as behaviour, whichdeviates from the normal duties of a public role

because of private (regarding family, closeprivate clique) or pecuniary or status gains. Thisincludes such behaviour as bribery, (use ofreward to pervert the judgement of a person ina place of trust); nepotism, (bestowal of

patronage by reasons of an ascribablerelationship rather than merit); andmisappropriation, (illegal appropriation of

public resources for private regarding uses).To this list we can add the practice of

cronyism. This can be described as bestowingfavours on close acquaintances who might beof the same religion, club, organisation, socialgroup or have been to the same school oruniversity (Nye 1967). These practices arerarely officially reported, but in several Asian


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countries seem to be accepted as a way of doingbusiness.

The influence of cronyism, bribery andnepotism on hotel management practices isgiven a low profile in the hospitality literature.For example, an examination of three textbooks

used for teaching International HospitalityManagement found that ethical problems andcorruption are not mentioned (Teare and Olsen1992; Jones and Pizam 1993; Gee 1994.) BothPizam (in Jones and Pizam) and Gee both givegood examinations of managing cross-culturalhospitality enterprises and emphasise the strongrelationship between successful management ofan overseas hospitality enterprise as well as theunderstanding of cultural differences, butneither go as far as examining ethical dilemmas

in the face of cultural differences.Corruption and economic development

Blunt and Jones (1992) suggest that corruptionis easier to get away with in authoritariancommand economies. Some analysts debatewhether corruption is an inhibitor to strongeconomic development (Patten 1998). In Asiaat least, the connection has been tenuous.Among the fifty-two nations judged ascorruption perception index (CPI) by

Transparency International, some of the fastestgrowing economies ranked as most corrupt. ACPI, including many of the countries in theAsia-Pacific, is shown in Table 1.

The Country Rank in Table 1 is based on aCPI score that relates to perceptions of the

degree to which corruption is perceived bybusiness people (a score of ten would indicatea totally corruption free country, ie Denmark).The score is assessed from a minimum of threesurveys per country. The standard deviationfigure indicates differences in the values of thesources for this index: the greater the variance,the greater the differences of perception amongthe sources. It could be suggested that Japan,with a high standard deviation of 1.6 is

perceived by some to be much less (or more)

corrupt that the score would indicate.Given the endemic nature of corruption inmany parts of Asia, it may be tempting toconclude that corruption is just another cost ofdoing business. That would be a mistake.

It is now common to see reference tocorruption in the press in almost all countriesin Asia at all levels and types of industry. Goodexamples are the trial and conviction in 1998of Prime Minister Tanaka of Japan for thereceipt of many millions of dollars from an

Country Country 1998 CPI Standard Surveys

Rank Score Deviation used

1 Denmark 10.0 0.7 9

4 New Zealand 9.4 0.7 8

6 Canada 9.2 0.5 9

Australia 8.7 0.7 8United Kingdom 8.7 0.5 10

16 Hong Kong 7.8 1.1 12

17 United States 7.5 0.9 8

25 Japan 5.8 1.6 11

29 Taiwan 5.3 0.7 11

52 China 3.5 0.7 10

55 Philippines 3.3 1.1 10

61 Thailand 3.0 0.7 11

74 Vietnam 2.5 0.5 6

80 Indonesia 2.0 0.9 10

Table 1: Corruption Perception Index

(Adapted fromTransparency International & Gottingen University 1998)

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aircraft company. The secretary-general ofNATO was also forced to stand down over anot dissimilar affair.

It would also appear that the scale ofcorruption for multinational enterprises(MNEs) operating in Asia has become very

much greater in recent times. In the 1960s itwas common to pay up to 5% of a total contractprice in bribes. It is currently thought that adeveloper should expect to pay up to 20% ofthe total contract price in the total bribes to winthe business. It needs to be made clear that muchinformation regarding such contracts andnegotiations is surrounded in secrecy and mostinformation is received anecdotally, or at leastcannot be ascribed to the source.

A recent example would appear to concern

a Southern Pacific Hotel Corporation (SPHC) project in India. There were significant problems opening a Parkroyal brand hotel,eventually resulting in a three-year delay. Thesedelays were reported and explained away byofficials and SPHC management in a numberof ways, none of which specifically stated thatthere had been demands for favours or money.It is strongly suggested that SPHC were tryingto be ethically correct and reject bribery as anoption so the project was delayed by

officialdom in the granting of licences andcertificates. Other reported projects that havefoundered or been delayed are from China,Vietnam and Cambodia. (Leung et al 1997;Mok and Lam 1997). A recently publicised caseinvolved a McDonalds opening in Beijing(Bowring, 1998). They were asked to pay thirty-two miscellaneous charges by the localauthorities. Upon investigation it was found thatonly two were legitimate.

It is also reported (SMH 1998) that decisions

regarding the allocation of retail contracts atHong Kongs new airport were based oncronyism rather than sound economic

judgement. This is in spite of Hong Kongsgenerally effective Independent Commissionagainst Corruption (ICAC).

Lesser Developed Countries (LDCs) do notmake it easy for developers. Many LDCs havecumbersome bureaucracies and officials areoften not well-educated. Many publicorganisations in Asia encourage policies that

punish wrongdoing but do not reward workersfor doing things right. In China, for instance,foreign investment proposals have to go through

four distinct layers in the administrativehierarchy (Dolais 1998):a) The State Council

b) The Ministry of Foreign Trade andEconomic Co-operation (MOFTEC)

c) Provincial governments (including centrally

governed municipalities)d) Governments below provincial level.Dolais (1998) suggests that the procedure

for approval (for high-class hotels) still remainscomplicated. The MOFTEC attempts to unify

policy and practice in the hotel and travelagency area. It is clear that with thecentralisation of such an approval process, thelow level of sophistication of the process andthe levels that have to be passed, that theopportunities for an official to delay an

application are many. There are thereforeopportunities for companies who wish to speedthe approval process to target officials in thesystem.

The temptation for public officials in LDCsto engage in corrupt practices is high. Thosewho make the decisions about where thecontracts are to be awarded almost always havevery little official remuneration. Their salariesare low, many have few private assets and manyare poorly educated. In China, for instance, the

Cultural Revolution removed generations ofeducation at a stroke. Officials are suddenlyconfronted with enormous sums of money overwhich they have some control. They are alsotempted by the high standards of living of theWestern businessmen with whom they have toliaise.

On the other side of the equation there ismarket competition where bribery is treated asan entry fee into a business proposition. Thosethat pay the bribes are almost always from

Western multi-nationals. The size of thecontracts for which they bid is getting greater.The competition between them is becomingmore intense and, for many of them, bribery isseen to be the best, and/or perhaps the only wayto win.

The Damage of Corruption

A bribe is used to manipulate people by buyinginfluence. Bribes create a conflict of interest

between the person receiving the bribe and hisor her organisation. They reduce freedom ofchoice by altering the conditions under whicha decision is made. A bribe is used to make one


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choice more attractive to the decision-maker.Enhancing the personal gain associated with thechoice by the creation of unearned income givesone option greater appeal. While the decision-maker gains by selecting the alternative withthe bribe, the choice itself is often less attractive.

A bribe can therefore result in allocating moreresources to a less desirable alternative.Developing countries into which bribes are

paid can be damaged in at least six ways:1 The payment of bribes diverts large sums of

money to the personal wealth of individualswho usually place the money in unnumberedforeign bank accounts. It would appear thatsome of this money finds its way into the

property markets of developed countries.2 Corruption distorts decision-making. The

whole market structure suffers whencontractors or developers are selected on thebasis of what the decision-maker will getrather than their ability to do the best job forthe most competitive price.

3 Corruption leads to projects being done very badly. Those who pay the bribes oftenrecover the money by compromising on thequality of the work they do. Safety standardsmay be compromised putting at serious riskthe people who work on the projects or

allowing the environment to be ruthlesslyexploited without regard to sustainabledevelopment.

4 Its not uncommon for projects to beselected, not because the country needs themmost, but because they provide the easiestroute to the biggest bribes.

5 Corruption has wider economicconsequences. The distortion of the processof selecting contractors underminesconfidence in the market and in the fairness

of society.6 Once a country becomes recognisedinternationally as one with a comparativelyhigh level of corruption, its reputation will

be seriously damaged. Such a country willfind it difficult to attract foreign investors,as honest investors are less likely to beinduced to put their money there.Damage to the developed countries and the

companies from which the bribes are paid mustalso be considered. Apart from ethical

considerations and professional reputations, thepaying of bribes damages the companies thatpay them in three practical ways:

1 There is a massive waste of money.Stockholders and investors may find itunacceptable that large parts of workingcapital should go to the personal enrichmentof a few individuals, largely in the form ofsecret savings and luxury expenditure in

developed countries.2 Advanced countries have at least as muchof an interest in avoiding the distortion tothe international trading environment as thedeveloping countries do. When largenumbers of major international contracts arewon essentially because the higher bidders

paid larger or better-directed bribes and notbecause of the superiority of their productsand services, there is real cause for concern.

3 Theres a serious risk that corrupt practices

that are developed in foreign dealings willflow back into the countries from which thebribes originated. Some of the salesmen andmarketers who gain experience in theircompanys export departments and learn that

paying bribes is an effective way to win business, and consequently to earn a promotion, will be placed back in thedomestic sales force. They may begin toapply the lessons they learned in the exportdepartment to the domestic market.

Culture, Ethics and ManagementEducation

From the above it can be seen that corruptionwould appear to be endemic in businessdealings in many Asian countries. One purposeof the primary research reported in this paperwas to ascertain how expatriate hotel managersoperate in an ethical framework which is atvariance to their own. Nauman (1993) suggeststhat role ambiguity is inherently higher forexpatriate managers because the job itself may

be performed in a way significantly differentfrom the way an equivalent domestic positionis performed. Li and Tse (1998), in their studyof expatriate satisfaction, support this view in

proposing that the most important factor in jobsatisfaction for expatriate managers is roleclarity.

Zaccarelli (1984), in an article regarding thedevelopment of an ethical strategy forhospitality managers in third world countries,debated what happens when two conflictingethical systems meet and how the hotelier andthe host culture can work and live in mutual


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understanding. How far should hotel managersgo in accepting practices such as bribes,degradation of human dignity etc, which arecontrary to their own ethical values?

There still seem to be few satisfactoryanswers to these questions. Although the

number of units in business ethics in generalbusiness courses in universities across the worldhas increased, a review of studies measuringthe impact of teaching ethics to future managersconcluded that business schools and the

business community should be alarmed overthe lack of ethics and business and societycourses offered in todays business schools(Weber 1990). Inclusion of ethics studies intourism and hospitality education would alsoappear to be lax (Kahn and McCleary 1996).

It must also be ascertained as to whether itis possible to train managers to be ethical. Canmanagers be made to be ethical by laying downcodes of conduct within organisations? Therehave been several approaches to this question(such as Jackson 1995; Fritzsche 1997;Donaldson and Dunfee 1985; Kelly 1955),which may help managers judge the merit oftheir personal value systems in the internationalenvironment. Homer (1987) developed a usefulmodel of ethical analysis of management

decision making (Figure 1). Within this model

there is a consideration of moral standards ofbehaviour, prior to the consideration of thedilemmas facing the decision-maker. Homerdescribes these as the criteria we use to judgeour behaviour and that of others. He warns thatthey tend to be subjective, imprecise and

variable between individuals. They may alsovary from one situation to another (for example,our attitude towards lying). We should tracethese moral standards back to our ethicalsystems of belief, which we can clarify as

providing guiding principles for our decisionmaking.

If systems of belief are different (or evenincompatible) between different cultures, thenare we to stop trading with these countries? Itis difficult to avoid the influence and

implications of different value systems on ourdecision making in the international arena. Is,for example, bribery, nepotism or cronyism

justifiable in cultures where this is normalpractice? Should we, (from countries that donot condone these practices), follow this

practice?Condon (1981) suggests that an

understanding of the differences between values(that reflect culture) and ethics (that transcendculture) is useful and that ethical decision-

making is not culturally relative. That is, we do

Adapted from Homer, L.T., 1987, Ethical analysis and human resource management.

Human Resource Management. Fall, Vol. 26:3, pp. 313-330

Financial

Legal

Organisational

Social

Personal

Culturalexperiences

Ethical

beliefsystems

Economicand socialsituation

Moral

standards ofbehaviour

Content ofmanagementdilemma

Figure 1: Model of Ethical Analysis in Management Decisions


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not have to accept the values of the host countrythat we do not feel are appropriate. This isobviously a complex issue that may besimplified by identifying the various factorsinvolved in ethical decision making in theinternational context. These seem to be:

personal values which individuals hold; group values which are held in common by,for example, a peer group;

religious values, which have differentrelative influences in different societies;

cultural values which are particular to aparticular community or nation; and

fundamental human values which may beheld in common by all, or most countries.While this may be helpful for setting codes

of ethics for companies, it does not necessarily

help the manager on a day to day basis. Manyof these decisions are not made on a rationalbasis, other than the personal rationalisationsthat the manager might manufacture. Festinger(1957) indicates that when there is a clash

between our attitudes and our behaviour,internal conflicts are reduced by rationalisingour behaviour, hence, any decision can be

justified. It is thought to be possible it do thisbecause of the way each person sees andorganises their world through a series of

personal constructs (Kelly, 1955). Some ofthese constructs may be judged as superordinate(perhaps not able to be violated) and some aresubordinate (more capable of change andmodification). Management capability can bedivided into two different competencies (Brady1990; Barham and Antal 1994). The first aspectidentifies doing competencies, which refer toactively managing the business and strategicdirections, managing change and personaleffectiveness and the theoretical constructs of

how to do a job or make a decision. The secondaspect focuses on the being competencies,which underpin the way the job is done in thefield, the way managers think and reason andthe belief and values that motivate them.

These divisions of capability, competenceand rationalisation can be illustrated in twoways. At Southern Cross University, Australia,students engaged in a unit concerned withmanaging hospitality enterprises in the PacificAsia region are given various scenarios in

which bribery or other forms of corruption arediscussed. They are asked for their suggestionson how to resolve the problem. Students

(especially those with management experience)have to wrestle with which is the mostappropriate strategy. Is it the one reflecting the

philosophy that all forms of corruption are tobe outlawed, or should they follow practice,where bribery is seemingly endemic and is seen

as the way to do business?An insight into business practices in somecountries is illustrated in the following research

project.

Research Method

Anecdotal evidence suggests that corruptoperational practices are common inmultinational hotels operating in Asia. Researchwas carried out to ascertain practisingmanagers opinions and the general level ofunderstanding of corrupt practices in four majorareas Dealing with officials Internal relations Human Resources Food and Beverage.

There are obvious limitations and problemsin getting managers to freely discuss their own

behaviours, especially if those behaviours mightbe considered unethical or unlawful. Issues oftrust and confidentiality in data gathering andreporting were fully explored with theindividuals before any attempt was made atdiscussion of the research issues.

The Study Group

Fourteen people were invited to participate asthe study group. They were a conveniencesample and the author knew all participants. Allhad management experience in more than onehotel property in the Asia-Pacific and could be

considered to be experienced expatriatemanagers. All the subjects were white, nativeEnglish speakers who had been trained in theUSA, UK or Australia. The hotels in which

participants were employed were joint venturesand were from eight different multinationalhotel companies (MHC) portfolios, all ofwhich were headquartered outside Asia.

In May 2000, nine of these managers werestill practising in Asia; the remaining five nowwork in Europe or Australia. While the focus

group participated mainly because of theirassociation with the author and was a groupconvened on the basis of convenience, this


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cordial relationship facilitated the collection ofsensitive material. The findings are notgeneralisable but can assist in giving a clearerunderstanding of the tensions created betweenconventional western ethical business

behaviour and business practices in LDCs.

Method

Data was collected in two phases1 All respondents were asked to complete self-

administered postal questionnaires thatasked for responses to questions based onvalues and attitudes to different levels ofcorruption commonly found in hotels inAsia.

2 Three of these managers consented to in-depth, semi-structured interviews basedaround the questionnaire. The duration ofeach interview varied from one to threehours.Additional information regarding codes of

ethics from each MHC was also sought.Most of the questions were based on

agreeing to accept a scenario, such as Do youaccept that bribery of officials is an integral partof doing business in ....... ? (the country in Asiain which they were working or had worked).

A series of follow-up questions to elicit personal reactions was then asked, such asHave you ever offered a bribe to an officialfor ........... ? (A range of services could beselected.) and Do you know of others who haveoffered bribes to officials for...........? Allquestions allowed space to expand on answers.Most respondents took this opportunity. Indeed,it seemed as if many wished to unburdenthemselves of their exploits. Even given thecathartic nature of the disclosures, the scale andthe pervasive nature of corruption at all levelssurprised the author who has several years ofAsian experience.

Results

All the MHCs examined had some form of awritten code of ethics. However, these were notreadily available and were given a low profile.The majority of MHCs stated that any form ofcorruption would result in dismissal from thecompany. However, the behaviours covered in

the codes might be interpreted as being moreconcerned with managers taking bribes, ratherthan offering them.

All the managers accepted that personalvalues had been compromised in the pursuit of

business, but that a successful operation wouldhave been difficult to maintain if illegal

practices were not entered into. The practicesranged from one respondent paying taxi drivers

to work above quota, to all managers admittingto paying local officials for a variety of reasons,such as allowing goods to be let throughcustoms without undue delay and granting

permits for wide ranging services (such assewage and water). Payment was frequently notin cash, but comprised of free or subsidisedfood, drink and accommodation to localofficials and their extended families.

The respondents explained and rationalisedthese behaviours in a number of ways which

included absolving themselves from guilt: Thepractice was in place before I arrived, the sizeof the misdeed: It was only a few dollars aweek and collectivism: All the other hotelsare doing it.

The managers were also asked whether theyhad ever been offered or had accepted personalgifts while in Asia. All answered in theaffirmative. They again rationalised theseactions by suggesting that they applied their

judgement as to what to accept and what to do

with the gift. On the human resources front,most agreed that the practice of nepotism andcronyism was a problem, especially in training.Most did not condone it, but they allacknowledged that it went on and was difficultto control, accepting that it was normal

business practice. Providing employment forfavours inhibited workplace change in that theintroduction of new work practices was oftendifficult, especially when this involved usingless staff. Systematic training in new procedures

and processes was also often not successful,leading to variable service delivery and someunacceptable work practices.

Other respondents suggested that while theseproblems were linked to employee nepotism, itmade finding staff in a tight market easier, forexample, when several new hotels were openingin an area. It was also suggested that sanctioningthe practices of nepotism and cronyism alsomeant that dismissal of staff was very difficult.


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Discussion

Given these results (however anecdotal andnon-representative the group), it could besuggested that corruption is alive and well andout of control. However, if the idea ofcorruption is placed in an historical,sociopolitical context, then we can see that allis not lost. Johnson (1995) focuses on therelative nature of corruption. He suggests thatsubjective changes in perceptions and valuesduring transition periods (such as currently existin Asia), when markets are being established,have an impact on both the definition ofcorruption and its growth.

History supports this view. Britain developedas a trading nation in the 17th century and as anindustrial power in the 19th. During both of these

periods Britain endured significant corruptionproblems, as did the United States in the 19th

and 20th centuries when it developed into aninternational superpower. This wasaccompanied by a corrupt political systemwhich is paralleled in LDCs in Asia andelsewhere today. During transitional phases,agreement as to what is and what is not corruptis often at its lowest and rapid change producesstrange new connections between wealth and

power. People are also confronted with newvalues and problems, opportunities andtemptations.

It is evident that markets and corruption neednot be synonymous. Most societies havemanaged to establish workable boundaries andorderly relationships between market dealingsand the public realm. The decision not to engagein corruption rests not just on a calculation ofmaterial costs and benefits, but also on the

presence of ties and loyalties in civil societythat transcend personal interest, and anacceptance that certain actions violate rules thatmatter, so while some things may acceptably

be bought and sold, others may not.What is apparent from this research and

empirical work of others (see Frizsche 1987;Frizsche and Becker 1984; Posner and Schmidt1987 ; Hegarty and Sims 1978) is that in thefollowing features are exhibited by the majorityof organisations operating internationally:1 Top management establishes the ethical

climate of the firm by example andenforcement.

2 Beliefs concerning the ethical nature ofspecific acts vary among operationalmanagers.

3 The response to ethical issues tends to differdepending on the type of ethical issue faced

by the decision-maker.

4 Managers believe that they are more ethicalthan their peers.5 One of the greatest ethical concerns involves

balancing the needs of the customer and theneeds of the organisation.All the managers in this study would like to

see most unethical acts eliminated. This shouldnot be surprising, given that managersinterviewed placed such emphasis on integrityin others and cite being responsible and honestas two of the most important management

attributes. These in turn influence a managersself-respect, which is critical to any professionalmanager. Given that there are some differencesof opinion on what is ethical and what is not, itis not surprising to find that successfulmanagers do engage in some unethical

behaviour. It is important, though, to learn thatmanagers do not perceive unethical behaviouras leading to success. The differences in

behaviour across specific issues raise moreserious questions. For example, why is there a

greater tendency to accept bribery than to acceptother behaviours that create a conflict ofinterest? Is bribery an issue in which utilitarianrationale is used, with the only beneficiary

being the firm?A key factor in ethical decision making

appears to be values: values of the decision-maker, the decision-makers peers and thedecision-makers superiors. The decision-makers values may not be as important as peeror top management values. This relationship

may have several explanations. Firstly,differential association theory states that thedecision-makers will accept the ethical values,at least in the work environment, of theindividuals they are most closely associatedwith, whether they are peers or topmanagement. Secondly, organisationaldistance theory maintains that associates whoare organisationally more distant from thedecision-maker will have less influence onethical values. Thirdly, the relative authority

theory states that the greater the authority asuperior has over a decision-maker, the morelikely the decision-maker is to adopt the ethical


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values of the superior. While these threeconcepts can be applied to explain most of thecontradictions in the empirical data with respectto the ethical beliefs of the three parties, we donot know their relative importance.

What is clear from the case described is that

many managers find them selves caught between local business practices (differentialassociation theory) and the parent company(organisational distance theory). They have tomake a moral and business decision, where touphold morals and perhaps lose business at alocal level, or to condone local practices andincur the wrath of head office in the homecountry. Even though personal ethics mayfavour the parent company, it is easier, and

possibly more effective in the short term, to

accept the status quo.Enhancing Ethical Behaviour

In spite of the differences in organisationalnorms and actual business practice,organisational policy explained in acomprehensive code of ethics would still appearto be an effective vehicle for maintaining ethical

behaviour in the firm. To be effective, the codemust be part of standard operating proceduresof the organisation and not simply a code forresolving ethical problems. This policy shouldreflect the views of top management and sucha policy should permeate the firm. It would thennot matter whether the decision-maker takescues from peers or top management as theirethical values would be similar.

By developing policy to promote ethical behaviour, one is denying the opportunity toengage in unethical behaviour. Policydevelopment should also recognise that

potential response to ethical issues differs byissue. Thus more attention should be given toissues that expatriate managers will be exposedto, such as bribery. Unethical behaviour tendsto be its own deterrent when the risk involved

becomes excessive. Thus mid-level and lowlevel risk behaviour should probably receivethe greatest attention in policy development.

Guidance also needs to be providedregarding the appropriate ways of balancing thedemands of the many stakeholders on thedecision-maker. A parent company may enforcethe organisational goal of high profitmaximisation, whereas the expatriate manager

may put the emphasis on organisationaleffectiveness, maintaining a good reputationand high morale. Organisations must eitheradopt this approach or fully recognise andaccept that the nature of business in differentcountries and make allowances accordingly.

Implications for Future Training

Moket al(1998) in a survey of work values ofChinese hotel managers suggest that successfuloverseas hotel operations depend on competentmanagement, but more importantly, culturally-sensitive expatriate managers. Hotel managersin the United States operate within an arenawhere political, economic, financial and legalsystems as well as the values of theirorganisations are all influenced by the samegeneral societal norms and values. The valuesof an international hotel company and thesocietal values of a host country may differwidely. Authors such as Cullen (1981) supportthis. Other researchers into cultural values havesurmised that what is valued by the people ofone country may not be valued by the peopleof another (Hofsted 1980), and thatunderstanding the values of the people withwhom one is engaged in business is animportant step (Tung and Miller 1990).

What this small piece of research suggestsis that many expatriate managers have becomeculturally sensitive in accepting corrupt

business practices. They recognise that these practices are corrupt and would rather dobusiness without them, but seem powerless tolimit their use if they are to stay in business.This is contrary to the work of Lai and Lam(1986) who submit that managers tend to

behave in ways that reflect what is valued intheir own country, especially when makingdifficult or complex decisions. What is foundhere is that experienced managers havesubsumed unethical cultural practices, ratherthan reflect the values of a) their own country,and b) the explicit instructions of their owncompany.

All the managers in the study grouprecognised that these dealings were corrupt andwould not be tolerated in more developedcountries or systems. These managers weretrained either in a US, UK or similar system,where a general understanding of businessethics is implicit. There are obvious


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implications for managers and other staff whohave been trained in hotels in LDCs and wishto move within the company. How do they

become de-trained?How do we best prepare students for the leap

into management decision-making in a cultural

environment different from their own? Thecurrent situation is that most graduates entertheir first job unaware of the difficult ethicaldilemmas they are about to face (Casado et al1994). Gamio and Sneed (1992) suggest that a

program of cross cultural training is necessaryfor anyone who takes an overseas appointment,while Seeley (1979) states that cross-culturaltraining provides a framework within which

people can develop skills and acquire theknowledge that increases their ability to

function effectively.The question still remains; Should ethicsbe added to the hospitality curriculum, and ifso, where and how?. Khan and McCleary(1996) clearly answer with a resounding yes,and in all subjects. They submit that it isessential that future hospitality managers arenot only aware of ethical issues but haveadequate ethical knowledge to make practicaldecisions that are based on sound ethical

principles. Given the international nature of the

hospitality business and the implications of theresearch described above, it is clearlyimperative that any ethics teaching is donewithin a cradle of cultural understanding.

In addition, companies doing business inregions such as the Asia Pacific must recognisethat there are different business practices andaccept that there extra costs of doing business,viz. corruption. It could be suggested that hidingthese practices, while being aware of their

presence, is the same as condoning them. Only

by really accepting that they are happening willwe have any hope of managing them in asystematic, methodical and profitable way.


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Paul Reynolds is associate professor ofhospitality management at the School ofTourism and Hospitality Management,Southern Cross University, Coffs Harbour,

NSW, 2457, Australia.

Tel: (61) 266 59 3312Fax: (61) 266 593144Email: [email protected]

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