Russian Business Ethics

We can learn a lot about the fundamental nature of business ethics by looking at its operation in various countries at different levels of economic development and with very different histories. Former members of the USSR are a good place to start. Russia, for example, was once at the heart of the Soviet empire, yet today — 20 years after the fall of that empire — Russia continues to struggle. The country’s per capita GDP is middling (i.e., about 1/3 of American GDP), and the economy has been growing steadily for years, but it’s far from free of problems. Law and order (including the functioning of its basic democratic institutions) continues to be a challenge there. Note also that Russia fares very badly on Transparency International’s Corruption Index.

So what about the role of business ethics in civilizing (and hopefully growing) the Russian economy?

See this story by Khristina Narizhnaya, for the Moscow Times: Business Ethics Get Codified

Business ethics are improving in Russia, on paper at least.

More local companies are emulating Western standards and adopting ethics codes to help them operate in a corrupt environment and create the appearance of trustworthiness.

Such codes regulate everything a company’s employees do, from how they dress to how they act in case a bribe is offered….

In the last three years, state companies, including Sberbank and Rosneft, have established codes for their workers as part of President Dmitry Medvedev’s initiative to increase transparency. Gazprom has begun putting together its ethics guidelines, which could take more than a year to deploy. Private companies have followed suit….

The entire piece is interesting and well worth reading, but I think couple of issues in particular are worth thinking about. First, what is the point of all this explicit attention to ethics? Interestingly, at least some Russian business people seem to be aware that ethics is a fundamental building block for real success in business:

“It is good for the image — and clients, investors and partners respond with trust,” said Econika chief executive Andrei Iliopulo.

(The reference to “image” is a distraction, there. Iliopulo’s main point is about trust.)

Others see ethics as an absolute necessity on a macro scale, for the Russian economy as a whole:

Some experts see the ethics code trend as an example of transforming the economic model from wild capitalism to socially responsible business.

“Business feels this need and tries to fulfill it,” said Alexander Sergeyev, a professor at the School of Higher Economics. “It might seem strange, but people like to live by the rules….”

And then there’s the question of scope, and focus. What are the key issues to focus on? As the story notes, ethics codes can cover everything from conflict of interest to social responsibility:

[British-Russian conglomerate] TNK-BP’s code outlines a set of principles covering ethical conduct, employee behavior, external relationships, health, safety, security and environmental performance, control and finance.

That’s quite a range of issues. And when thinking about a country still struggling to “find its feet” in terms of business ethics, we might well want to ask about priority-setting. So, question for discussion: of the various issues mentioned above, which one should Russian businesses be focusing on? I’m not suggesting single-mindedness. But for the good of the Russian population as a whole, which business ethics issues is likely to be the most important?

(For more on the importance of business ethics for economic development, see Nobel Prize-winning economist Amartya Sen’s “Does Business Ethics Make Economic Sense?”)

3 comments so far

  1. John on

    When you have a political system that is based on the “power vertical” that is no more than one huge pyramid system with money (my share of what I allow you to corruptly take) flowing all the way from the bottom to the very top, Russian business ethics is a complete contradiction in terms. Most of the codes (if not all) are not worth the paper they are written on. Remember that the general rule is “you can do what you want in Russia so long as you never get between a Russian and their money”. Ask (just one of thousands) Bob Dudley at TNK-BP. VFM has nothing to do with value for money, only value for me.

  2. jilly on

    I think your question is interesting, but perhaps a bit confusing in this particular context. It is to my mind, very closely related to your questions about the aspects of business ethics to which investors and consumers should pay most attention.

    “But for the good of the Russian population as a whole, which business ethics issues is likely to be the most important?”

    Surely, for the good of the Russian population, all of the issues mentioned, “ethical conduct, employee behavior, external relationships, health, safety, security and environmental performance, control and finance” are important.

    The list itself seems to make at least one false dichotomy; that is, it separates ethical conduct and employee behaviour from those things that are affected by ethical conduct and employee behaviour. Furthermore, many of the other items on the list seem to me to be too closely entwined to be separated. Another way of asking the question might be to say, “Should Russian businesses choose to concentrate on (1) health, safety, security(?) and environmental performance, or (2) external relationships [e.g. bribes?], control and finance?” [Note that the categories reflect my understanding of what is being discussed, which may not be what was intended.]

    I do not think either that this tradeoff is a realistic one, or that all items are questions of ethics (some are questions of law). However, that said, I do think that John’s point is well taken. Laws are only as good as the will to enforce them, and in a limited and controlled market, consumers may have trouble making choices that can force companies to adhere to ethical principles.


  3. […] in February I blogged about Russian Business Ethics, and about the way that watching a developing economy helps us see the significance of ethics in […]

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