Governance and Business Ethics - An International Analysis

Abstract

Motivated by increasing investment of South Korean (SK) companies in the Czech Republic CR) and intensifying trade exchange between the two countries, this article investigates two important aspects of Czech business environment – governance and business ethics (BE) practices. With regards to governance, this text finds that although the CR seems to rank somewhat better on four out of six WGI aggregate indicators (Voice and Accountability, Political Stability and Absence of Violence, Regulatory Quality, and Rule of Law), as the confidence intervals for both countries overlap, better CR performance can only be confirmed for one indicator, i.e. Political Stability and Absence of Violence. Similarly, SK seems to outperform the CR on Government Effectiveness and Control of Corruption, however, this result is not clear for the same reason. We find that on all six aggregate indicators, SK and the CR show similar strengths as well as weaknesses, with the main difference being in the ranking, rather than different components or attributes themselves. In terms of BE, we use a questionnaire survey and we then explain our findings through categories of culture based on Hofstede, GLOBE Project and Trompenaars models. Similarly to governance practices, we find that CR and SK ethical attitudes and perceptions are more similar than expected. In general, Korean respondents perceive unethical practices as less of a problem. In both countries, unethical practices related to bribing and unfair pricing practices seem to bother respondents most, while Koreans report difficulties with unfair competitive practices much less often that Czech respondents. In BE promotion, Korean companies rely more heavily on CEO’s as opinion leaders, and punishment for unethical behaviour, whereas in the CR, the number one tool is corporate philosophy including ethics. Czech respondents feel less responsible to local community, society, and government and report the experience with ethical conflict between their personal ethics and the interests of their organizations more often than Korean respondents, and they appear much more situational. In making unethical decisions, Korean respondents would more strongly follow their superior and, overall, would place higher importance on ethical climate of the industry that Czech respondents. When faced with four hypothetical situations, in both countries, respondents thought they were more ethical than an average manager. The main difference was that in their behaviour and in how they felt about their own acts Koreans would be more strongly influenced by the overall ethical climate than Czech respondents.