Business Ethics in South America
Maria Cecilia Coutinho de Arruda
Business ethics in South America, as in many other countries, combine the positive (values, honesty, transparency, respect) and negative (corruption, fraud, bribery, inside information, human rights violations, lack of punishment). Because business ethics has been in the news all over the world for several years, business leaders from all South American countries (SACs) often ask for a specific definition of the term. There are clear rules and laws about correct and ethic ally sound business behavior, but few regions in these countries enforce compliance. Complicity and connivance in business are so common that in general the South American public profoundly distrusts business and government. Citizens, politicians, and business leaders seem to be confused by the concept of ethics and even more skeptical when this concept is related to business. Too often, public speeches and discussions of business ethics are more oratorical and superficial than they are serious and indicative of a strong commitment to moral values. Following the lead of many political and business leaders, and in the knowledge that many individuals from higher social classes go unpunished, many ordinary citizens of SACs justify unethical and even criminal behavior.
In order to raise the ethical level of business policies and performance, the Center of Studies for Ethics in Organizations – Fundacao Getulio Vargas, Sa˜o Paulo (CENE FGV EAESP) – was founded in 1992. Through workshops, confer ences, consulting, teaching, and training, CENE FGV EAESP has significantly sup ported companies, professionals, and academics interested in developing ethical parameters and principles to face the modern requirements of the business world in Brazil and Latin America. Thanks to its efforts, the Asociacion
Latinoamericana de Etica, Negocios y Economia (ALENE), or Latin American Business Ethics Network, was created in 1998. ALENE’s annual meetings in different SACs allow a deep and productive discussion of the serious problems that exist in the region. These conferences generate many publications that enable the integration of academics and business leaders from several SACs. ALENE members have played an important role in the International Society of Business, Economics, and Ethics (ISBEE), bringing cases and experiences that can help further ethics in developing countries.
In the 1990s, South American corporations began emphasizing business ethics practices. Codes of ethics or value statements have been articulated in over 80 percent of Brazilian companies, around 50 percent of Argentine firms, and a significant percentage in other SACs. By offering better wages, benefits, and work conditions, these companies and corporations try to drive their internal policies toward social justice (see justice).
By improving manufacturing processes and quality control, the society produced new, better, healthier, and more sustainable products for the marketplace. By paying their taxes honestly, these companies contributed significant income to the government. The process of globalization led multinational companies in SACs to review their ethical statements. They began to deal more carefully with such issues as diversity, sustainability, and prejudice concerning sex, age, and social status.
In order to guarantee high levels of ethical performance, it was necessary to create laws, agreements, business and professional associations, and voluntary technical norms. As an example, the Brazilian Association of Toy Makers – Associacao Brasileira de Fabricantes de Brinquedos (ABRINQ) – a strong association of over 300 toy manufacturers in Brazil, pre pared a voluntary technical norm to avoid the production of all dangerous features in any toy. The government supported the initiative, making this norm mandatory in all toy manufacturing companies. ABRINQ member companies now have an active foundation organized to avoid child labor in Brazil.
Rich in natural resources, SACs have been attractive to international investors, particularly large corporations. Nevertheless, economic growth in SACs has been very unequal. The new flow of wealth has protected elite members of society, who prospered by working for the government and became even wealthier after acquiring auctioned assets. The newly created jobs have tended to be temporary, low paid, and concentrated in specific economic sectors. Although managing privatization changes became a highly profitable activity, the drive toward making companies more competitive resulted in many middle and lower class workers losing their jobs.
With these trends, another ethical problem arose in SACs: the concentration of investments in large cities, while distant and rural regions struggle to survive, with little chance of receiving short term investments. Even in urban areas, many South American citizens live in slums, with little or no access to running water, electricity, drainage systems, adequate housing, education, and health. Chile, Argentina, Bolivia, Peru, and Brazil have established governmental pro grams to reduce the social price of economic development of the 1990s, but poverty is still an important issue in the business ethics arena: over 30 percent of SAC populations live in real poverty, according to the Economic Commission for Latin America (CEPAL), a regional sector of the United Nations located in Santiago, Chile.
The unfair income distribution in most SACs is a consequence of inflation generated material ism and corruption in governmental agencies, which do not distribute resources in a manner established by law. The culture of the Brazilian jeitinho (finding an unethical and easier way to solve any problem) persists among all social classes in most SACs (Appy, 1992: 50). The inflationary culture led to a devaluation of professional work, an impulse to seek easy ways of earning money, and a general ir responsibility and lack of concern about productivity (see profit, profits, and profit motive).
Often, it is difficult for businesses to adopt ethical practices in their relationships with government agents, clients, suppliers, and stake holders. Bribery, percentages, gifts, and other ‘‘payments’’ have become usual or mandatory in many sectors, and real moral dilemmas concerning managerial ethics and the ethical role of the manager have appeared. Illiteracy and low levels of education in SACs also promote unethical practices. Even though religion (primarily Roman Catholicism) is extremely important in SACs, many people seem to have lost their ability to distinguish between right and wrong. A complete revolution in habits seems necessary to change people’s attitudes toward moral values. Some business executives already play an important role in this effort by avoiding any kind of corruption, paying their bills on time, protecting the environment and environmental ethics, and having the courage to be honest.
Recognized as less developed countries, SACs have faced increasing competition in world markets, which induced industrialized nations to cluster together in regional economic blocs: the European Union (EU), the North American Free Trade Agreement (NAFTA), and some alliances among Japan and its East Asian neighbors. SACs felt the need to face both fair and unfair competition. Argentina, Brazil, Paraguay, and Uruguay created the Common Market of South America (MERCO SUR) in March 1991 in an attempt to integrate their economies and defend themselves from discriminatory tariffs from other countries. After many difficulties, the MERCOSUR countries are facing new developments, as AFTA – the American Free Trade Area – has gained strength.
Most SACs have gone through deep political and economic changes in the last few decades. The influences of different ideologies and the lack of governmental action in significant areas such as education, health, housing, and social welfare made private and non governmental organizations more aware of their social responsibility. The Instituto Ethos – Business and Social Responsibility – was founded in 1998 in Sa˜o Paulo, Brazil to supplement the Brazilian government’s social action. Its mission is to generate awareness and to mobilize and help companies manage their businesses in a socially responsible way. The institute brings together hundreds of companies in various sectors, formally committed to the construction of a fair and environmentally sustainable society. A large number of initiatives throughout the country has encouraged the creation of similar organizations in Argentina and Chile.
In Brazil, the FIDES Foundation – Fundacao Instituto de Desenvolvimento Empresarial e Social – and IBASE – Instituto Brasileiro de Analises Sociais e Economicas – have worked on the Social Balance Sheet (SBS) as a tool to report on the status of business social actions. Although not mandatory, many companies have filled out FIDES IBASE forms to prepare and publish their SBS in order to inform society, clients, and stockholders about their social responsibility activities developed during a specific period. Other SACs have begun implementing this practice.
After dealing with socially responsible activities related to society as a whole, companies now seem more interested in internally reinforcing compliance with their codes of ethics. CENE FGV EAESP has helped many Brazilian companies to create their own business ethics statements and to implement solid business ethics programs. Nevertheless, the most recent concern of business ethics in several SACs has been with ethics in corporate governance. Because of a number of scandals that came to light, the executives, boards, and stockholders of the largest organizations have discussed and revised their best practices with more attention on their ethical perspective.
South American business schools have introduced business ethics to their curricula so to better prepare undergraduate and graduate students to make ethical business decisions in pre sent or future positions. The Fundacao Getulio Vargas – Sa˜o Paulo is the first business school in Latin America to offer business ethics as a specific concentration area in MS and PhD programs.
At both the micro and macro levels, business ethics has come to the forefront in South America. Companies, universities, and governmental agencies have begun to implement successfully ethical systems based on solid moral values.
See also Foreign Corrupt Practices Act; organization ethics; religion and business ethics; social cost
benefits; socioeconomics; work and family
Bibliography
Appy, R. E. (1992). Etica empresarial e inflacao. In N. G. Teixeira (ed.), A Etica no Mundo da Empresa. Sa˜o Paulo: Pioneira, 47 55.
Arruda, M. C. C. (2002). Codigo de Etica: Um Instrumento Que Adiciona Valor. Sa˜o Paulo: Atlas.
Arruda, M. C. C., Whitaker, M. C., and Ramos, J. M. R. (2003). Fundamentos de Etica Empresarial e Economica, 2nd edn. Sa˜o Paulo: Atlas.
Ashley, P. A. (2003). Etica e Responsabilidade Social nos Negocios. Sa˜o Paulo: Saraiva.
Debeljuh, P. (2003). El Desafio de la Etica. Buenos Aires: Temas Grupo Editorial.
Humberg. M. E. (2002). Etica na Polı´tica e na Empresa. Sa˜o Paulo: Editora CLA.
Monett, L. (1994). The political economy of MERCOSUR. Journal of Anti American Studies and World Affairs, 3 (4), 101 41.
Newton, L. and Ford, M. M. (1992). Taking Sides: Clashing Views on Controversial Issues in Business Ethics and Society, 2nd edn. Guilford, CT: Dusking Publishing.
Schmidt, E. (2000). Etica y Negocios para America Latina, 3rd edn. Lima: Universidad del Pacifico; OXY.
Steinberg, H. (2003). A Dimensao Humana da Governanca Corporativa: Pessoas Criam as Melhores e as Piores Praticas. Sa˜o Paulo: Editora Gente.