"do as the Romans do in Rome"? A "pragmatic" corporate governance perspective beyond ethical relativism in Asian emerging economies

Abstract

When doing business in Asia, one cannot escape the feeling that ethical norms and values are not "valued" that highly nor exist there obvious incentives to behave ethically in the fierce competitive Asian emerging markets. One could even question the ethical sensitivity to ethical values as they are often violated. Moreover, corruption is prevalent in the Asian emerging markets as surveys consistently reveal. However, since the debilitating Asian crisis of 1997-2001, governance structures have been dramatically improved throughout Asia. Despite the considerable improvements, Asian companies are still lacking behind in terms of transparency, accountability to all its shareholders and being responsible to affected stakeholders. This is mainly because insiders in family or state owned enterprises still rule most of the biggest Asian companies. Moreover, when ethical business principles are propagated in Asia, these theoretical ethical concepts originate more often than not from Western philosophy. Is it surprising that a Chinese culture might prefer to adhere to Confucian, Mencius or Lao Tse's principles, or that Indonesians or Indians are likely more familiar with the ancient epics of Ramayana and Mahabharata, narratives of good and evil? In business, however, allegedly attempting to apply ethical principles - be it teleological, deontological or consequentialist in nature - have largely remained a mere public relations exercise to convince others about their presumed good ethical intentions. The reality on the ground is often quite different: powerful business elite in 'tacit' or even explicit collaboration with the politicians and public officials rule vast business empires. This political elite uses the "rule by law" instead of making sure their business "associates" abide by the rule of law. Relationship building is a survival mechanism in those emerging Asian markets where one faces enormous institutional voids. Unfortunately, those relationships can easily turn into nepotistic and corrupt networks. Most business executives will therefore adapt the adage to "do as the Romans do in Rome" to survive in such uncertain and fierce environments where one cannot fully rely on contractual enforcement or arm's length governance structures.