Business Ethics in Russia
Deryl W. Martin and Jeffrey H. Peterson
Business ethics in Russia most accurately could be described by the ancient maxim, caveat emptor (buyer beware). Virtually all domestic business transactions are legally unregulated and self policing. To appreciate the origin of the Russian ethos, one must understand that the simplest economic concepts we often take for granted are relatively new to the Russian people. For example, though perhaps initially inconceivable, the notions of property rights, ownership, freedom of contract, profit – and even the idea of a market itself – are ideas only now evolving in modern Russian society (see property, rights to; freedom of contract; profit, profits, and profit motive). With the collapse of the principle of centralized planning, the Russian people are, as a matter of necessity, embracing capitalism to provide for their daily needs. Absent a legal basis to enforce sanctions and lacking a history of contract law, Russians continue to grapple with the ethics of unbridled commerce. The variety of ethical mis deeds arising from this legal void are well documented (see, for example, Meirovich and Reichel, 2000).
It became legal in 1991 for private Russian concerns to broker the buying and selling of virtually any commodity (see Kolosov, Martin, and Peterson, 1993). With the attendant and requisite expansion of that which constitutes private property, several businesses developed for the purpose of making a market in which the buying, selling, and trading of such property is accommodated. Due primarily to the lack of accurate and reliable information concerning supply, demand, and ownership encumbrances, performance on the agreements to trade goods on these ‘‘exchanges’’ is not guaranteed by market owners – unlike more developed markets in
Western and other cultures. Without a legal structure to enforce contract compliance, all Russian business transactions occur in a legal vacuum where self interest and personal (micro economic) decisions aggregate to societal (macro economic) outcomes (see Martin and Peterson, 1991; Werhane, 1989; Appressyan, 1997). Thus, the nature of these markets is consistent with the notion of caveat emptor in its strictest sense.
The state of business ethics in Russia continues to evolve. Despite the potential repercussions of an unregulated environment, new Russian businesses are being created exponentially and existing companies are thriving. Gradually, these new enterprises are becoming the provider of the bulk of life’s basic goods for the Russian people as they grapple with the ethics of their unfamiliar economic freedom, and begin to examine the implications of the development of civil society in Russia (Taylor and Kazakov, 1997). It is perhaps most important to note that although the notion of private property is again new to their culture, Russian businessmen and women apparently realize that behaving in an ethical fashion – fulfilling contractual obligations – is in their long run self interest. The continued existence of markets indicates that economic agents in Russia have overwhelmingly chosen to eschew the short term gain associated with contract default in favor of building the reputational capital necessary for successful operation in self regulating markets.
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