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Evolution of
The evolution of business business ethics
ethics in India in India
Ron Berger and Ram Herstein
Department of Business Management,
Jerusalem Academic Center Lander Institute, Jerusalem, Israel
1073
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Introduction
Much attention is being directed towards emerging economies, and in particular the
BRIC countries (Brazil, Russia, India, and China) the four largest developing markets in
the world (Das, 2006; Kiggundu and Ji, 2008; Yen et al., 2011). The BRIC acronym
captures the reality of a shift in economic power away from the traditionally powerful
developed countries to emerging countries. These emerging economies tend to be very
heterogeneous in nature on the national, political, economic, cultural, and institutional
levels and in their approach to business ethics (LeFebvre, 2011; Luo et al., 2011; Berger
and Herstein, 2012). Because the BRIC countries are emerging as dominant economic
powers, understanding the direction in which business ethics is evolving in these
countries is of great importance for policy makers, academics, and business leaders
alike (Hoff and Pandey, 2005; Marques, 2010; Ardichvili et al., 2012). Rapid economic
growth may lead to the development of a distorted understanding of capitalism and
growth where money, power, survival and profitability at any cost are considered the
primary goals of business (Biswas, 1998; Kanagasabapathi, 2007; Birtchell, 2011) to
the detriment of the ethical facets of business (Ruhe and Lee, 2008; Jeffrey, 2010).
Whereas China (Berger and Herstein, 2012; Yen et al, 2011), Russia ( Jaffe and
Tsimerman, 2011; Ardichvili et al, 2012; Puncheva-Michelotti et al., 2010) and Brazil International Journal of Social
(Ardichvili et al, 2012; Fernanda, 2010; Berger et al., 2011) have attracted much Economics
Vol. 41 No. 11, 2014
attention in recent years with regard to business ethics, there is much less literature pp. 1073-1086
concerning business ethics in India (Berg and Holtrugge, 2001). One of the most r Emerald Group Publishing Limited
0306-8293
important focal points in business ethics research is the awareness of the effect of DOI 10.1108/IJSE-05-2013-0129
IJSE Eastern traditions on business ethics and how business is conducted globally (Christie
41,11 et al., 2003; Doniger, 2011; Roy et al., 2011; Ang and Leung, 2000). Of these eastern
traditions, the one based on Hinduism (Indias main religion) is one of the most
prominent in terms of the effect it has on business ethics, but until recent years this
effect has generally been neglected in academic research (Marques, 2010).
Research on business ethics has shown that perceptions of what constitutes ethical
1074 business standards differ significantly around the world. Business ethics has become
an important requirement for doing business in the global marketplace (Christie et al.,
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2003; Seshadri et al., 2007; LeFebvre, 2011), and is considered a necessary pillar for
business success (Hoff and Pandey, 2005; Raja, 2008; Tsalikis et al., 2008). Successful
global businesses in emerging economies tend to draw on indigenous cultural values
and practices to develop corporate strategies and management practices (Das, 2006;
Sharma, 2009; Mittal et al., 2011). Cultural and religious differences between countries
are the major reasons behind the variations in ethical standards and business practices
across nations (Ruhe and Lee, 2008). Examples include Guanxi in China, Blat in
Russia, Quan he in Vietnam, Ubuntu in South Africa, and Jugaad in India - all of
which are characterized by network-based business strategies, connections, social
networking, rich interpersonal relationships, a deep understanding of indigenous
knowledge and practices, and a unique combination of organic and mechanistic
organizational structures and management practices (Berger and Herstein, 2012).
This paper focuses on India, a rapidly growing emerging economy that has so far
been largely neglected in academic research (Roy et al., 2011). With over one billion
people India is ethnically, religiously, socially, and culturally a very heterogeneous
country (Berg and Holtrugge, 2001) and hence understanding its business and political
dynamics is of great importance. India is predominantly a Hindu country, with around
83 per cent of its population adhering to that religion (2011). While India is ranked
nineth among the worlds largest economies, its gross domestic product (GDP) per
Capita of over $1,500 (Mittal et al., 2011) places it among the poorest nations in the
world. Indian business ethics is influenced by religion in a more profound way than in
any other nation, even in comparison to the Chinese business system. Understanding
business ethics in the Indian (Vedantic) context is crucial to the success of foreign
business organizations and business people who wish to do business in India
(Chakraboty, 1995). Further, at a time when corruption scandals threaten the stability
of the Indian government and hinder its economy, it is becoming increasingly important
for managers to inquire whether business success in India comes at an ethical cost,
and whether or not they are willing to pay the price (Fikkert and Hansan, 1998;
Kanagasabapathi, 2007; Swaminathan and Anklesaria, 2010). Das (2006) reported that
Chinese businessmen attribute the main reason for their success to networking (Guanxi)
and government assistance; whereas Indian businessmen claim they succeed despite
government intervention. These businessmen further state that the main reason for their
success is Jugaad the ability to find innovative ways around prohibitive rules and red
tape. Chinas success is in many ways government led, whereas Indian businessmen
view government as a corrupt, wasteful and ineffective entity.
However, it has been shown that firms in emerging economies tend primarily to
draw on indigenous cultural values and practices to develop corporate strategies,
management practices, and business ethics to succeed (Berger et al., 2013b; Viswesvaran
and Deshpande, 1996). While western thought promotes the idea that action is
propelled by individual drives, the Vedantic philosophy common in India views the role
of personality with its internal predispositions for motivation, as secondary to societal
considerations in guiding behavior (Kopalle et al., 2010; Doniger, 2011; LeFebvre, 2011).
Hence an ethical individual is someone who acts according to acceptable standards of
behavior in terms of personal and social welfare within specific cultural boundaries.
Thus when applying managerial theories to the Indian milieu, certain adjustments
must be made to accommodate for differences in culture and religion (Chakraboty,
1997; Rajeev, 2007; Tsalikis et al., 2008). Research suggests that it makes good
long-term business sense to be ethical (Kedia et al., 2006; Seshadri et al., 2007). Hence, to
understand business ethics in India, it is crucial to be better acquainted with its culture,
history, and religion the form the basis of its business ethical infrastructure.
society from senior bureaucrats and politicians to high ranking public servants to
professionals to clerks and street vendors (Agarwala, 2001). At present Indias justice
system appears to be geared to serve political rather than public interests, in addition to
being mired in corruption (Bhasin, 2010; Berg and Holtrugge, 2001). In such a system,
there is little likelihood that individual complaints will be heard or processed. When
politicians and government officials themselves are corrupt, they will do little to clean up
scams or hold people accountable (Chakraboty, 1995). Table I compares the major ethical
indicators of India to those of its neighbors and to western countries.
The size of a countrys economy, as measured by the GDP, reflects the market value
of all finished goods and services produced within a country in a given time frame. It is
considered a good indicator of the size of a countrys market in relation to other
countries. Table I shows that India has the nineth largest economy worldwide.
The level of foreign direct investment in a country is an indicator of inflow of foreign
capital, skills, job opportunities, and technology. Tsalikis et al. (2008) used the
Corruption Perceptions Index that assesses perceived corruption in the public sector in
183 countries. India ranks 95 overall, and is the second worst in the region on this index
(Indonesia is the worst). This suggests that Indias public infrastructure is viewed as
extremely corrupt and unethical.
Chatterjee et al. used the Bribe Payers Index (BPI) that ranks 28 of the worlds
largest economies according to the perceived likelihood that companies from these
countries pay bribes abroad. It is used to analyze the level of corruption in the various
countries. The BPI data indicate that although Indian business firms are relatively
unethical in their business conduct, ranking 19 out of 28, they are still better perceived
than Indonesian and Chinese firms. Nevertheless, this highlights the fact that Indian
firms are thought to act unethically abroad by trying to secure business deals through
bribery. This state can be explained, partially, by what is considered ethical in the
western vs the Indian view of business ethics, The Nielsen Global Online Consumer
Confidence Survey (CFS), examines consumer confidence levels above and below a
baseline of 100, which indicates degrees of optimism and pessimism of consumers in
a specific country with regard to its economy. The CFS data shows that although India
Ranking of the Economy FDI (average CPI BPI CFS NSRI EDBI
Country by GDP (IMF-2011) 2007-2011) (2011) (2011) (Q2-2011) (2007) (2011)
USA 1 112.9 (2) 7.1 (24) 8.1 (10) 78 (5) 0.83 (21) 4
Taiwan 19 7.1 (32) 6.1 (32) 7.5 (19) 89 (2) 0.72 (37) 25
S.Korea 15 7.2 (31) 5.4 (43) 7.9 (13) 52 ( 1) 0.73 (34) 8
Table I. China 2 86.3 (3) 3.6 (75) 6.5 (27) 105 (3) 0.47 (108) 91
Comparative business India 9 20.4 (18) 3.1 (95) 7.5 (19) 126 (5) 0.53 (73) 132
ethics indicator Japan 3 13.3 (22) 8 (14) 8.6 (4) 55 (0) 0.87 (16) 17
suffers from massive corruption and poverty, its consumers view its future prospects Evolution of
positively. This surprising attitude might be the result of Jugaad and Karma business ethics
concepts that are so embedded in Indias psyche, where fatalism and belief in
reincarnation are so evident. The National Social Responsibility Index (NSRI) in India
measures the extent to which the state treats its citizens fairly, and whether or not the
country and its institutions consider their citizens well-being a top priority. The NSRI
data show that Indian citizens see themselves as being treated unethically by Indias 1077
national institutions. The only two countries in the region whose NSRI status is even
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worse than that of India are Indonesia and China which are not free market economies.
The World Bank created the Ease of Doing Business Index. It ranks 183 economies in
terms of the ease of doing business. This scale shows that India is one of the most
difficult and most complex places for doing business, globally; this poor ranking
explains why so many Indian business people boast that their success in business was
achieved in spite of negative intervention by the Indian bureaucracy and its unethical
behavior.
(2) the notion of rebirth, where actions in a particular lifetime may bear fruit either
during the current life or during future ones (reincarnations); and
(3) good actions in the present lead to good outcomes in the future and
inappropriate current actions lead to bad outcomes in the future.
Karma, a part of the Vedantic ethical philosophy, states that an individual who chooses
the appropriate (ethical) path attains happiness (in the long run) and one who chooses
pleasure or easy options (the unethical path), loses sight of the long-term objective
(happiness) and gains negative Karma instead. Karma can be seen as the Vedantic
basis for justice in that each individual receives what he/she deserves in life based
upon past actions. Indian cultural, political and business ethics are focused around the
four main goals of Dharma (justice, duty, and virtue): Artha (success and prosperity),
Kama (pleasure), and Moksha (liberation). The way to achieve the goal of positive
Karma passes through an optimal synthesis of the four facets of Karma: Dharma,
Artha, Kama, and Moksha (Bhasin, 2005, 2010). In Indian philosophies these are
considered as the four main goals of life, also known as the Purusharthas.
Dharma
Generally means the teachings of the Vedantic philosophy and its code of conduct and
duty. It is the principle that guides a responsible life and relies more on reason than on
intuition (Mittal et al., 2011). It means Law or the Natural Law. It is a core concept of
major importance in Indian Vedantic philosophy and religion. It is the ethical sense
that helps regulate and discipline ones actions (Bhasin, 2010). It encompasses a broad
area of social customs, and sets out specific rules of conduct for almost every aspect of
life (Thondup, 1995). The earliest beginnings of ancient Indias criminal and civil law
can be traced back to Dharma (Roy et al., 2011). Kama, Artha, and Moksha should
always conform to Dharma to guarantee the existence of an orderly society (Bhasin,
2010). While Dharma, Artha, and Kama are related to the goals of everyday life,
Moksha has to do with the ultimate goal of releasing oneself from the endless cycle of
death and rebirth. Dharma defines those behaviors deemed necessary for the
maintenance of the natural order of things and encompasses behavioral ideas such as
duty, vocation, religion and everything that is considered correct, proper, or decent. It is
believed that one who lives in accordance with Dharma principles proceeds more
quickly towards Moksha (spiritual liberation). In traditional Hindu society, Dharma
has historically denoted a variety of concepts, such as Vedantic ritual, ethical conduct,
and civil and criminal law (Roy et al., 2011).
Kama
Covers the entire range of human cravings or enjoyment of life such as physical desires,
physical pleasures and gratification at the sensory level. It is one of the goals of Hindu
life and refers to sensual or sexual pleasure. It is associated with emotions and desires
related to ones physical existence. It is viewed as the thread that holds things together. It Evolution of
is the guide to virtuous and gracious living and family life (Sharma and Talwar, 2005). business ethics
Artha in India
Is the instrument for fulfilling Kama. It refers to the idea of material prosperity and
material attainments. The concept encompasses achieving widespread fame, garnering
wealth and maintaining an elevated social standing. Artha is one of the duties of a 1079
person in the second stage of life, the householder stage. During this stage a person
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should accumulate as much wealth as possible, without being greedy, should help
and support his family and should be able to donate to noble charitable causes.
Accumulation of wealth is viewed as the apparent reason for ones actions. It is
considered to be a noble goal as long as it follows the dictates of Vedantic ethics and
morality (Rajeev, 2007). It states that the principal role of money is to serve the needs of
society (Sharma and Talwar, 2005).
Moksha
Means the release, or the liberation from the concomitant suffering involved in being
subject to the cycle of repeated reincarnations (Doniger, 2011). It is defined as a loving,
eternal union with God and considered the utmost perfection of existence. It is considered
Mans supreme goal, to be attained through spiritual and religious endeavor to the next
life. Most Indians believe that an individuals situation in this lifetime is by and large the
consequence of actions committed in previous lives and that change is relatively difficult
to accomplish (Gopalan and Stahl, 1998). This can lead to attempts to better ones future
incarnations by acting ethically in this lifetime, or to abstain from acting unethically for
fear of condemning ones future incarnations. This ethical behavior can be achieved
through excellence at work and going beyond material desires. In India Moksha is the
non-apparent motivator that affects the way one acts either ethically or unethically.
latent attitude of disregard for the individuals lack of control over business risks and
its effect on future incarnations. Instead of increasing business ethics and hence
improving ones prospects in future lifetimes Jugaad has decreased business ethics
through short-term fatalism (Swaminathan and Anklesaria, 2010). Jugaad rejects risk
prevention (now common in developed business models) and offers an alternative
model for dealing with emerging uncertainties (Birtchell, 2011). Indias economic
expansion in an environment of abject poverty and limited resources is, to a large
extent a product of the Jugaad culture.
the Chinese in this respect. Indian business culture places a premium on favors,
friendship, and clanship. Friendship is highly valued, whether based on
multigenerational family friendships, school friendships, or personal friendships.
Managers from collectivistic societies are more likely to follow the utilitarian theory of
ethical decision making than managers from individualistic societies. The utilitarian
theory supports the credo no harm done nothing wrong which might explain why
Indian corporations often use this logic to justify otherwise unethical behavior.
It would be interesting to further research business ethics in India in relation to
Jugaad. Since Jugaad lays the groundwork for corruption and unethical behavior it is
an important point for business ethics research. is a double edged sword; it has been
glorified by many as the streak of ingenuity that solves tough problems under
daunting constraints, but it can also be a synonym for deception, trickery and
subterfuge. The pitfalls of Jugaad for the development and civil society in India include
the pronounced lack of a value structure that would provide valuable, long-term
guidance, and corrosive, rampant political corruption. Slicing through bureaucracy,
inadequate infrastructure and chaotic environment demands a unique tool, one that
sometimes neglects western ethical norms.
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Corresponding author
Dr Ron Berger can be contacted at: ron@sigma-pcm.co.il
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