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Profit and Principles: Business Ethics in Hotel

Management Companies in Asia

Paul Reynolds
Southern Cross University

Abstract This paper reviews how the dealings


of hotel companies are influenced by
When conducting business in Asia, many different ethical standards in the country
hotel managers employed by companies of operation. Also examined are the
based in the West find that some of their tensions created by conflicting codes of
codes of ethical conduct inhibit fluid ethical conduct when operating in a
business dealings. different cultural environment and the
Evidence from the recent collapses of implications for management practices
business in the Philippines, Malaysia and and training. A report is made on an
Indonesia shows that corruption, empirical study of a group of fourteen
nepotism and bribery are common managers who work in eight international
occurrences and are accepted as part of multinational hotel companies (MHCs)
general business life. It is also clear that in South-East Asia. The results endorse
these are not the only countries where some of the anecdotal material, which
such practices are common. There is suggest that practices considered corrupt
much anecdotal and published evidence by Western ethical standards are routinely
of projects (including hotel projects), practised by MHCs operating in South-
which have foundered or have been East Asia.
rendered unprofitable or unmanageable
by illicit and unlawful practices in China, Keywords: Corruption, Ethics,
Vietnam and Thailand. Management, South-East Asia, Hotels,
Human Resources

The Master said: ‘Riches and rank are what


every man craves; yet if the only way to
Australian Journal of Hospitality Management obtain them goes against his principles, he
Volume 7, Number 1, pages 1–13 should desist from such a pursuit.’
Copyright © The Centre for Hospitality and Tourism
Management, The University of Queensland. (Lau, D.C.1979, p.4.5)
ISSN 1320–5161

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Introduction Corruption and Business Practice

The following paper will review ethical tensions In all countries, corruption does serious damage
experienced by some expatriate hotel managers. to the standards of public life, the institutions
These managers often work in countries with of government, the cohesion of society and the
codes of ethical practice different from those management of the economy. It does particular
of their employer and their contemporaries. The harm to developing countries, where the
paper will review a range of literature dealing political fabric may be thinner, civic institutions
with the topic and also report on an empirical less firmly based and the economy more fragile.
study where opinions were solicited from a Corruption in a developing country is a heavy
group of fourteen hotel managers, trained in burden on economic activity. It raises costs and
Western countries, who had working experience blunts competitiveness. It distorts management
in hotels in the Asia-Pacific region. decision making, making it more difficult, for
In the past thirty years, the tourism industry example, to gauge the exact consequences of
has seen a proliferation of multinational investment, spending, tax and regulatory
corporations operating throughout the world. decisions.
These companies are, for the most part, based In December 1998, the Convention on
in Europe and the USA. They all have a Combating Bribery of Foreign Public Officials
permanent force of professional managers who in International Business Transactions was
are dispersed throughout the world to set up signed by the twenty-nine nations that make up
and manage their properties. the Organisation of Economic Co-operation and
The rapid globalisation of the industry has Development (OECD). This marked a
brought forward the question of whether watershed in the acceptance that bribery and
hospitality and tourism operations can be corruption are commonplace in international
managed in a uniform manner regardless of the business transactions, especially in less
country in which they operate. Can a developed countries (LDCs).
multinational company apply uniform On a lesser, but no less pervasive scale, there
personnel policies and procedures, and establish are regular reports of officials in many countries
homogeneous managerial practices in all their demanding money for granting of all kinds of
operations, or are these allowed to vary country permits, ranging from visas to building
by country? Several authors have investigated applications. It is highly likely that managers
expatriate managerial effectiveness (Richards of hospitality organisations operating in LDCs
1991; Yu and Pine 1994; Li and Tse 1998). will come into contact with this level of
Globalisation of the business environment corruption, along with bribery, nepotism and
has created an increasingly complex set of cronyism.
relationships for the modern business manager. Nye (1967) describes corruption (by
According to Hofstede (1993) the consequences government officials) as behaviour, which
for managerial practices resulting from cultural deviates from the normal duties of a public role
differences are numerous and significant. If because of private (regarding family, close
there is divergence between managerial or private clique) or pecuniary or status gains. This
corporate values and work practice values, then includes such behaviour as bribery, (use of
there are likely to be significant problems in reward to pervert the judgement of a person in
managing the workforce. Values affect attitudes a place of trust); nepotism, (bestowal of
that, in turn, affect behaviour. There can patronage by reasons of an ascribable
therefore be a lack of congruence between a relationship rather than merit); and
manager’s personal values and her/his misappropriation, (illegal appropriation of
behaviour at work. Such incongruence also public resources for private regarding uses).
occurs for the expatriate manager when To this list we can add the practice of
corporate values do not conform with work cronyism. This can be described as bestowing
values in the country of operation. One such favours on close acquaintances who might be
lack of equilibrium is created by the presence of the same religion, club, organisation, social
in the operating country of what the group or have been to the same school or
organisation would consider corrupt business university (Nye 1967). These practices are
practice. rarely officially reported, but in several Asian

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countries seem to be accepted as a way of doing Transparency International, some of the fastest
business. growing economies ranked as most corrupt. A
The influence of cronyism, bribery and CPI, including many of the countries in the
nepotism on hotel management practices is Asia-Pacific, is shown in Table 1.
given a low profile in the hospitality literature. The Country Rank in Table 1 is based on a
For example, an examination of three textbooks CPI score that relates to perceptions of the
used for teaching International Hospitality degree to which corruption is perceived by
Management found that ethical problems and business people (a score of ten would indicate
corruption are not mentioned (Teare and Olsen a totally corruption free country, ie Denmark).
1992; Jones and Pizam 1993; Gee 1994.) Both The score is assessed from a minimum of three
Pizam (in Jones and Pizam) and Gee both give surveys per country. The standard deviation
good examinations of managing cross-cultural figure indicates differences in the values of the
hospitality enterprises and emphasise the strong sources for this index: the greater the variance,
relationship between successful management of the greater the differences of perception among
an overseas hospitality enterprise as well as the the sources. It could be suggested that Japan,
understanding of cultural differences, but with a high standard deviation of 1.6 is
neither go as far as examining ethical dilemmas perceived by some to be much less (or more)
in the face of cultural differences. corrupt that the score would indicate.
Given the endemic nature of corruption in
Corruption and economic development many parts of Asia, it may be tempting to
conclude that corruption is just another cost of
Blunt and Jones (1992) suggest that corruption doing business. That would be a mistake.
is easier to get away with in authoritarian It is now common to see reference to
command economies. Some analysts debate corruption in the press in almost all countries
whether corruption is an inhibitor to strong in Asia at all levels and types of industry. Good
economic development (Patten 1998). In Asia examples are the trial and conviction in 1998
at least, the connection has been tenuous. of Prime Minister Tanaka of Japan for the
Among the fifty-two nations judged as receipt of many millions of dollars from an
corruption perception index (CPI) by

Table 1: Corruption Perception Index

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
11 Australia 8.7 0.7 8
United 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

(Adapted from Transparency International & Gottingen University 1998)

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aircraft company. The secretary-general of four distinct layers in the administrative
NATO was also forced to stand down over a hierarchy (Dolais 1998):
not dissimilar affair. a) The State Council
It would also appear that the scale of b) The Ministry of Foreign Trade and
corruption for multinational enterprises Economic Co-operation (MOFTEC)
(MNEs) operating in Asia has become very c) Provincial governments (including centrally
much greater in recent times. In the 1960’s it governed municipalities)
was common to pay up to 5% of a total contract d) Governments below provincial level.
price in bribes. It is currently thought that a Dolais (1998) suggests that the procedure
developer should expect to pay up to 20% of for approval (for high-class hotels) still remains
the total contract price in the total bribes to win complicated. The MOFTEC attempts to unify
the business. It needs to be made clear that much policy and practice in the hotel and travel
information regarding such contracts and agency area. It is clear that with the
negotiations is surrounded in secrecy and most centralisation of such an approval process, the
information is received anecdotally, or at least low level of sophistication of the process and
cannot be ascribed to the source. the levels that have to be passed, that the
A recent example would appear to concern opportunities for an official to delay an
a Southern Pacific Hotel Corporation (SPHC) application are many. There are therefore
project in India. There were significant opportunities for companies who wish to speed
problems opening a Parkroyal brand hotel, the approval process to target officials in the
eventually resulting in a three-year delay. These system.
delays were reported and explained away by The temptation for public officials in LDCs
officials and SPHC management in a number to engage in corrupt practices is high. Those
of ways, none of which specifically stated that who make the decisions about where the
there had been demands for favours or money. contracts are to be awarded almost always have
It is strongly suggested that SPHC were trying very little official remuneration. Their salaries
to be ethically correct and reject bribery as an are low, many have few private assets and many
option so the project was delayed by are poorly educated. In China, for instance, the
officialdom in the granting of licences and Cultural Revolution removed generations of
certificates. Other reported projects that have education at a stroke. Officials are suddenly
foundered or been delayed are from China, confronted with enormous sums of money over
Vietnam and Cambodia. (Leung et al 1997; which they have some control. They are also
Mok and Lam 1997). A recently publicised case tempted by the high standards of living of the
involved a McDonalds opening in Beijing Western businessmen with whom they have to
(Bowring, 1998). They were asked to pay thirty- liaise.
two miscellaneous charges by the local On the other side of the equation there is
authorities. Upon investigation it was found that market competition where bribery is treated as
only two were legitimate. an entry fee into a business proposition. Those
It is also reported (SMH 1998) that decisions that pay the bribes are almost always from
regarding the allocation of retail contracts at Western multi-nationals. The size of the
Hong Kong’s new airport were based on contracts for which they bid is getting greater.
cronyism rather than sound economic The competition between them is becoming
judgement. This is in spite of Hong Kong’s more intense and, for many of them, bribery is
generally effective Independent Commission seen to be the best, and/or perhaps the only way
against Corruption (ICAC). to win.
Lesser Developed Countries (LDCs) do not
make it easy for developers. Many LDCs have The Damage of Corruption
cumbersome bureaucracies and officials are
often not well-educated. Many public A bribe is used to manipulate people by buying
organisations in Asia encourage policies that influence. Bribes create a conflict of interest
punish wrongdoing but do not reward workers between the person receiving the bribe and his
for doing things right. In China, for instance, or her organisation. They reduce freedom of
foreign investment proposals have to go through choice by altering the conditions under which
a decision is made. A bribe is used to make one

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choice more attractive to the decision-maker. 1 There is a massive waste of money.
Enhancing the personal gain associated with the Stockholders and investors may find it
choice by the creation of unearned income gives unacceptable that large parts of working
one option greater appeal. While the decision- capital should go to the personal enrichment
maker gains by selecting the alternative with of a few individuals, largely in the form of
the bribe, the choice itself is often less attractive. secret savings and luxury expenditure in
A bribe can therefore result in allocating more developed countries.
resources to a less desirable alternative. 2 Advanced countries have at least as much
Developing countries into which bribes are of an interest in avoiding the distortion to
paid can be damaged in at least six ways: the international trading environment as the
1 The payment of bribes diverts large sums of developing countries do. When large
money to the personal wealth of individuals numbers of major international contracts are
who usually place the money in unnumbered won essentially because the higher bidders
foreign bank accounts. It would appear that paid larger or better-directed bribes and not
some of this money finds its way into the because of the superiority of their products
property markets of developed countries. and services, there is real cause for concern.
2 Corruption distorts decision-making. The 3 There’s a serious risk that corrupt practices
whole market structure suffers when that are developed in foreign dealings will
contractors or developers are selected on the flow back into the countries from which the
basis of what the decision-maker will get bribes originated. Some of the salesmen and
rather than their ability to do the best job for marketers who gain experience in their
the most competitive price. company’s export departments and learn that
3 Corruption leads to projects being done very paying bribes is an effective way to win
badly. Those who pay the bribes often business, and consequently to earn a
recover the money by compromising on the promotion, will be placed back in the
quality of the work they do. Safety standards domestic sales force. They may begin to
may be compromised putting at serious risk apply the lessons they learned in the export
the people who work on the projects or department to the domestic market.
allowing the environment to be ruthlessly
exploited without regard to sustainable Culture, Ethics and Management
development. Education
4 It’s not uncommon for projects to be
selected, not because the country needs them From the above it can be seen that corruption
most, but because they provide the easiest would appear to be endemic in business
route to the biggest bribes. dealings in many Asian countries. One purpose
5 Corruption has wider economic of the primary research reported in this paper
consequences. The distortion of the process was to ascertain how expatriate hotel managers
of selecting contractors undermines operate in an ethical framework which is at
confidence in the market and in the fairness variance to their own. Nauman (1993) suggests
of society. that role ambiguity is inherently higher for
6 Once a country becomes recognised expatriate managers because the job itself may
internationally as one with a comparatively be performed in a way significantly different
high level of corruption, its reputation will from the way an equivalent domestic position
be seriously damaged. Such a country will is performed. Li and Tse (1998), in their study
find it difficult to attract foreign investors, of expatriate satisfaction, support this view in
as honest investors are less likely to be proposing that the most important factor in job
induced to put their money there. satisfaction for expatriate managers is role
Damage to the developed countries and the clarity.
companies from which the bribes are paid must Zaccarelli (1984), in an article regarding the
also be considered. Apart from ethical development of an ethical strategy for
considerations and professional reputations, the hospitality managers in third world countries,
paying of bribes damages the companies that debated what happens when two conflicting
pay them in three practical ways: ethical systems meet and how the hotelier and
the host culture can work and live in mutual

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understanding. How far should hotel managers there is a consideration of moral standards of
go in accepting practices such as bribes, behaviour, prior to the consideration of the
degradation of human dignity etc, which are dilemmas facing the decision-maker. Homer
contrary to their own ethical values? describes these as the criteria we use to judge
There still seem to be few satisfactory our behaviour and that of others. He warns that
answers to these questions. Although the they tend to be subjective, imprecise and
number of units in business ethics in general variable between individuals. They may also
business courses in universities across the world vary from one situation to another (for example,
has increased, a review of studies measuring our attitude towards lying). We should trace
the impact of teaching ethics to future managers these moral standards back to our ethical
concluded that business schools and the systems of belief, which we can clarify as
business community should be alarmed over providing guiding principles for our decision
the lack of ‘ethics’ and ‘business and society’ making.
courses offered in today’s business schools If systems of belief are different (or even
(Weber 1990). Inclusion of ethics studies in incompatible) between different cultures, then
tourism and hospitality education would also are we to stop trading with these countries? It
appear to be lax (Kahn and McCleary 1996). is difficult to avoid the influence and
It must also be ascertained as to whether it implications of different value systems on our
is possible to train managers to be ethical. Can decision making in the international arena. Is,
managers be made to be ethical by laying down for example, bribery, nepotism or cronyism
codes of conduct within organisations? There justifiable in cultures where this is normal
have been several approaches to this question practice? Should we, (from countries that do
(such as Jackson 1995; Fritzsche 1997; not condone these practices), follow this
Donaldson and Dunfee 1985; Kelly 1955), practice?
which may help managers judge the merit of Condon (1981) suggests that an
their personal value systems in the international understanding of the differences between values
environment. Homer (1987) developed a useful (that reflect culture) and ethics (that transcend
model of ‘ethical analysis’ of management culture) is useful and that ethical decision-
decision making (Figure 1). Within this model making is not culturally relative. That is, we do

Cultural
experiences

Ethical Moral
belief standards of
systems behaviour Financial
Legal
Content of
management Organisational
Economic dilemma
Social
and social
situation Personal

Adapted from Homer, L.T., 1987, Ethical analysis and human resource management.
Human Resource Management. Fall, Vol. 26:3, pp. 313-330

Figure 1: Model of Ethical Analysis in Management Decisions

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not have to accept the values of the host country (especially those with management experience)
that we do not feel are appropriate. This is have to wrestle with which is the most
obviously a complex issue that may be appropriate strategy. Is it the one reflecting the
simplified by identifying the various factors philosophy that all forms of corruption are to
involved in ethical decision making in the be outlawed, or should they follow practice,
international context. These seem to be: where bribery is seemingly endemic and is seen
• personal values which individuals hold; as the ‘way to do business’?
• group values which are held in common by, An insight into business practices in some
for example, a peer group; countries is illustrated in the following research
• religious values, which have different project.
relative influences in different societies;
• cultural values which are particular to a Research Method
particular community or nation; and
• fundamental human values which may be Anecdotal evidence suggests that corrupt
held in common by all, or most countries. operational practices are common in
While this may be helpful for setting codes multinational hotels operating in Asia. Research
of ethics for companies, it does not necessarily was carried out to ascertain practising
help the manager on a day to day basis. Many managers’ opinions and the general level of
of these decisions are not made on a rational understanding of corrupt practices in four major
basis, other than the personal rationalisations areas
that the manager might manufacture. Festinger • Dealing with officials
(1957) indicates that when there is a clash • Internal relations
between our attitudes and our behaviour, • Human Resources
internal conflicts are reduced by rationalising • Food and Beverage.
our behaviour, hence, any decision can be There are obvious limitations and problems
justified. It is thought to be possible it do this in getting managers to freely discuss their own
because of the way each person sees and behaviours, especially if those behaviours might
organises their world through a series of be considered unethical or unlawful. Issues of
personal constructs (Kelly, 1955). Some of trust and confidentiality in data gathering and
these constructs may be judged as superordinate reporting were fully explored with the
(perhaps not able to be violated) and some are individuals before any attempt was made at
subordinate (more capable of change and discussion of the research issues.
modification). Management capability can be
divided into two different competencies (Brady The Study Group
1990; Barham and Antal 1994). The first aspect
Fourteen people were invited to participate as
identifies ‘doing’ competencies, which refer to
the study group. They were a convenience
actively managing the business and strategic
sample and the author knew all participants. All
directions, managing change and personal
had management experience in more than one
effectiveness and the theoretical constructs of
hotel property in the Asia-Pacific and could be
how to do a job or make a decision. The second
considered to be experienced expatriate
aspect focuses on the ‘being’ competencies,
managers. All the subjects were white, native
which underpin the way the job is done in the
English speakers who had been trained in the
field, the way managers think and reason and
USA, UK or Australia. The hotels in which
the belief and values that motivate them.
participants were employed were joint ventures
These divisions of capability, competence
and were from eight different multinational
and rationalisation can be illustrated in two
hotel companies’ (MHC) portfolios, all of
ways. At Southern Cross University, Australia,
which were headquartered outside Asia.
students engaged in a unit concerned with
In May 2000, nine of these managers were
managing hospitality enterprises in the Pacific
still practising in Asia; the remaining five now
Asia region are given various scenarios in
work in Europe or Australia. While the focus
which bribery or other forms of corruption are
group participated mainly because of their
discussed. They are asked for their suggestions
association with the author and was a group
on how to resolve the problem. Students
convened on the basis of convenience, this

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cordial relationship facilitated the collection of All the managers accepted that personal
sensitive material. The findings are not values had been compromised in the pursuit of
generalisable but can assist in giving a clearer business, but that a successful operation would
understanding of the tensions created between have been difficult to maintain if ‘illegal’
conventional western ethical business practices were not entered into. The practices
behaviour and business practices in LDCs. ranged from one respondent paying taxi drivers
to work above quota, to all managers admitting
Method to paying local officials for a variety of reasons,
such as allowing goods to be let through
Data was collected in two phases customs without undue delay and granting
1 All respondents were asked to complete self- permits for wide ranging services (such as
administered postal questionnaires that sewage and water). Payment was frequently not
asked for responses to questions based on in cash, but comprised of free or subsidised
values and attitudes to different levels of food, drink and accommodation to local
corruption commonly found in hotels in officials and their extended families.
Asia. The respondents explained and rationalised
2 Three of these managers consented to in- these behaviours in a number of ways which
depth, semi-structured interviews based included absolving themselves from guilt: ‘The
around the questionnaire. The duration of practice was in place before I arrived’, the size
each interview varied from one to three of the misdeed: ‘It was only a few dollars a
hours. week’ and collectivism: ‘All the other hotels
Additional information regarding codes of are doing it’.
ethics from each MHC was also sought. The managers were also asked whether they
Most of the questions were based on had ever been offered or had accepted personal
agreeing to accept a scenario, such as ‘Do you gifts while in Asia. All answered in the
accept that bribery of officials is an integral part affirmative. They again rationalised these
of doing business in ....... ?’ (the country in Asia actions by suggesting that they applied their
in which they were working or had worked). judgement as to what to accept and what to do
A series of follow-up questions to elicit with the gift. On the human resources front,
personal reactions was then asked, such as most agreed that the practice of nepotism and
‘Have you ever offered a bribe to an official cronyism was a problem, especially in training.
for ........... ?’ (A range of services could be Most did not condone it, but they all
selected.) and ‘Do you know of others who have acknowledged that it went on and was difficult
offered bribes to officials for...........?’ All to control, accepting that it was ‘normal
questions allowed space to expand on answers. business practice’. Providing employment for
Most respondents took this opportunity. Indeed, favours inhibited workplace change in that the
it seemed as if many wished to unburden introduction of new work practices was often
themselves of their exploits. Even given the difficult, especially when this involved using
cathartic nature of the disclosures, the scale and less staff. Systematic training in new procedures
the pervasive nature of corruption at all levels and processes was also often not successful,
surprised the author who has several years of leading to variable service delivery and some
Asian experience. unacceptable work practices.
Other respondents suggested that while these
Results problems were linked to employee nepotism, it
made finding staff in a tight market easier, for
All the MHCs examined had some form of a
example, when several new hotels were opening
written code of ethics. However, these were not
in an area. It was also suggested that sanctioning
readily available and were given a low profile.
the practices of nepotism and cronyism also
The majority of MHCs stated that any form of
meant that dismissal of staff was very difficult.
corruption would result in dismissal from the
company. However, the behaviours covered in
the codes might be interpreted as being more
concerned with managers taking bribes, rather
than offering them.

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Discussion 2 Beliefs concerning the ethical nature of
specific acts vary among operational
Given these results (however anecdotal and managers.
non-representative the group), it could be 3 The response to ethical issues tends to differ
suggested that corruption is alive and well and depending on the type of ethical issue faced
out of control. However, if the idea of by the decision-maker.
corruption is placed in an historical, 4 Managers believe that they are more ethical
sociopolitical context, then we can see that all than their peers.
is not lost. Johnson (1995) focuses on the 5 One of the greatest ethical concerns involves
‘relative’ nature of corruption. He suggests that balancing the needs of the customer and the
subjective changes in perceptions and values needs of the organisation.
during transition periods (such as currently exist All the managers in this study would like to
in Asia), when markets are being established, see most unethical acts eliminated. This should
have an impact on both the definition of not be surprising, given that managers
corruption and its growth. interviewed placed such emphasis on integrity
History supports this view. Britain developed in others and cite being responsible and honest
as a trading nation in the 17th century and as an as two of the most important management
industrial power in the 19th. During both of these attributes. These in turn influence a manager’s
periods Britain endured significant corruption self-respect, which is critical to any professional
problems, as did the United States in the 19th manager. Given that there are some differences
and 20th centuries when it developed into an of opinion on what is ethical and what is not, it
international superpower. This was is not surprising to find that successful
accompanied by a corrupt political system managers do engage in some unethical
which is paralleled in LDCs in Asia and behaviour. It is important, though, to learn that
elsewhere today. During transitional phases, managers do not perceive unethical behaviour
agreement as to what is and what is not corrupt as leading to success. The differences in
is often at its lowest and rapid change produces behaviour across specific issues raise more
strange new connections between wealth and serious questions. For example, why is there a
power. People are also confronted with new greater tendency to accept bribery than to accept
values and problems, opportunities and other behaviours that create a conflict of
temptations. interest? Is bribery an issue in which utilitarian
It is evident that markets and corruption need rationale is used, with the only beneficiary
not be synonymous. Most societies have being the firm?
managed to establish workable boundaries and A key factor in ethical decision making
orderly relationships between market dealings appears to be values: values of the decision-
and the public realm. The decision not to engage maker, the decision-maker’s peers and the
in corruption rests not just on a calculation of decision-maker’s superiors. The decision-
material costs and benefits, but also on the maker’s values may not be as important as peer
presence of ties and loyalties in civil society or top management values. This relationship
that transcend personal interest, and an may have several explanations. Firstly,
acceptance that certain actions violate rules that differential association theory states that the
matter, so while some things may acceptably decision-makers will accept the ethical values,
be bought and sold, others may not. at least in the work environment, of the
What is apparent from this research and individuals they are most closely associated
empirical work of others (see Frizsche 1987; with, whether they are peers or top
Frizsche and Becker 1984; Posner and Schmidt management. Secondly, organisational
1987 ; Hegarty and Sims 1978) is that in the distance theory maintains that associates who
following features are exhibited by the majority are organisationally more distant from the
of organisations operating internationally: decision-maker will have less influence on
1 Top management establishes the ethical ethical values. Thirdly, the relative authority
climate of the firm by example and theory states that the greater the authority a
enforcement. superior has over a decision-maker, the more
likely the decision-maker is to adopt the ethical

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values of the superior. While these three may put the emphasis on organisational
concepts can be applied to explain most of the effectiveness, maintaining a good reputation
contradictions in the empirical data with respect and high morale. Organisations must either
to the ethical beliefs of the three parties, we do adopt this approach or fully recognise and
not know their relative importance. accept that the nature of business in different
What is clear from the case described is that countries and make allowances accordingly.
many managers find them selves caught
between local business practices (differential Implications for Future Training
association theory) and the parent company
(organisational distance theory). They have to Mok et al (1998) in a survey of work values of
make a moral and business decision, where to Chinese hotel managers suggest that successful
uphold morals and perhaps lose business at a overseas hotel operations depend on competent
local level, or to condone local practices and management, but more importantly, culturally-
incur the wrath of head office in the home sensitive expatriate managers. Hotel managers
country. Even though personal ethics may in the United States operate within an arena
favour the parent company, it is ‘easier’, and where political, economic, financial and legal
possibly more effective in the short term, to systems – as well as the values of their
accept the status quo. organisations – are all influenced by the same
general societal norms and values. The values
Enhancing Ethical Behaviour of an international hotel company and the
societal values of a host country may differ
In spite of the differences in organisational widely. Authors such as Cullen (1981) support
norms and actual business practice, this. Other researchers into cultural values have
organisational policy explained in a surmised that what is valued by the people of
comprehensive code of ethics would still appear one country may not be valued by the people
to be an effective vehicle for maintaining ethical of another (Hofsted 1980), and that
behaviour in the firm. To be effective, the code understanding the values of the people with
must be part of standard operating procedures whom one is engaged in business is an
of the organisation and not simply a code for important step (Tung and Miller 1990).
resolving ethical problems. This policy should What this small piece of research suggests
reflect the views of top management and such is that many expatriate managers have become
a policy should permeate the firm. It would then culturally sensitive in accepting corrupt
not matter whether the decision-maker takes business practices. They recognise that these
cues from peers or top management as their practices are corrupt and would rather do
ethical values would be similar. business without them, but seem powerless to
By developing policy to promote ethical limit their use if they are to stay in business.
behaviour, one is denying the opportunity to This is contrary to the work of Lai and Lam
engage in unethical behaviour. Policy (1986) who submit that managers tend to
development should also recognise that behave in ways that reflect what is valued in
potential response to ethical issues differs by their own country, especially when making
issue. Thus more attention should be given to difficult or complex decisions. What is found
issues that expatriate managers will be exposed here is that experienced managers have
to, such as bribery. Unethical behaviour tends subsumed ‘unethical’ cultural practices, rather
to be its own deterrent when the risk involved than reflect the values of a) their own country,
becomes excessive. Thus mid-level and low and b) the explicit instructions of their own
level risk behaviour should probably receive company.
the greatest attention in policy development. All the managers in the study group
Guidance also needs to be provided recognised that these dealings were corrupt and
regarding the appropriate ways of balancing the would not be tolerated in more developed
demands of the many stakeholders on the countries or systems. These managers were
decision-maker. A parent company may enforce trained either in a US, UK or similar system,
the organisational goal of high profit where a general understanding of business
maximisation, whereas the expatriate manager ethics is implicit. There are obvious

AJHM 10 AUTUMN 2000


implications for managers and other staff who
have been trained in hotels in LDCs and wish
to 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? The
current situation is that most graduates enter
their first job unaware of the difficult ethical
dilemmas they are about to face (Casado et al
1994). Gamio and Sneed (1992) suggest that a
program of cross cultural training is necessary
for anyone who takes an overseas appointment,
while Seeley (1979) states that cross-cultural
training provides a framework within which
people can develop skills and acquire the
knowledge that increases their ability to
function effectively.
The question still remains; ‘Should ethics
be added to the hospitality curriculum, and if
so, where and how?’. Khan and McCleary
(1996) clearly answer with a resounding ‘yes’,
and ‘in all subjects’. They submit that it is
essential that future hospitality managers are
not only aware of ethical issues but have
adequate ethical knowledge to make practical
decisions that are based on sound ethical
principles. Given the international nature of the
hospitality business and the implications of the
research described above, it is clearly
imperative that any ethics teaching is done
within a cradle of cultural understanding.
In addition, companies doing business in
regions such as the Asia Pacific must recognise
that there are different business practices and
accept that there extra ‘costs of doing business’,
viz. corruption. It could be suggested that hiding
these practices, while being aware of their
presence, is the same as condoning them. Only
by really accepting that they are happening will
we have any hope of managing them in a
systematic, methodical and profitable way.

AJHM 11 AUTUMN 2000


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Tel: (61) 266 59 3312
Teare R. and Olsen, M., eds. 1992,
Fax: (61) 266 593144
International Hospitality Management,
Email: preynold@chec.scu.edu.au
USA:Wiley.

AJHM 13 AUTUMN 2000

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