lunes, 7 de marzo de 2011

Decision making + Ethical behavior in international business

1. What does the statement “all capitalism is crony capitalism” is referring to? Do you agree with this statement or not? Give an example.
The statement “all capitalism is crony capitalism” is referring to the condition in which every economy based in capitalism, is an economy in which success in business depends on the relationships between business people and government entities. The relationships are not base on quality or merit, but on the posture that their result be mutual advantageous for the interest of both parties, influencing the economy and the society.
In the worst of the cases, this deformation of capitalism can create a situation in which the taxes are used to pay overpriced good and services of favored suppliers.
Nowadays, in an era in which the corporations are increasing more and more their social and economical power, the maximization of value for their shareholders and the pursuit of money at any cost is becoming the rule for business, this statement provides a suitable description of what capitalism has become. A very popular example is the case of Enron. Let see the next articles:
"Enron used revenues –not profits- as its primary financial objective, performance drivers and measure of success. Enron’s use of distorted, “hyper-inflated” revenues was more important to it in creating the impression of innovation, high growth and spectacular business performance that the masking of debt in special purpose entities"1
'Cronyism' made in USA
Enron used creative accounting practices to dress up profits and conceal losses. When the managers saw disaster looming, they sold off their shares at a profit. Those footing the bill were the employees, their pension fund and all investors without insider connections.
Before the bankruptcy, the firm had been politically 'connected' on all sides. Enron made huge contributions to Bush Jr's election campaign. Eighty-five per cent of Congress members received Enron funds. The corporation favoured the Republicans, but also backed the laissez-faire wing of the Democratic Party. Last year Enron contributed decisively to writing the Bush Government's national energy plan and placed its own people in key positions in the administration.2

1. Dharan, B. & Bufkins, W. Red Flags in Enron’s Reporting Of Revenues and Key Financial Measures. Retrieved form: http://www.ruf.rice.edu/~bala/files/dharan-bufkins_enron_red_flags.pdf
2. Daily News (2002). Lessons from the Enron scandal : Crony capitalism everywhere. P. Niggli. Features. July 16, 2002. Retrieved from: http://www.dailynews.lk/2002/07/16/fea03.html


2. What is a Banana Republic? Why the author is comparing India with a Banana Republic?
Banana Republic is a republic ruled by the crony capitalism, in which the power is concentrated and ruled by a small, self-elected and wealthy group of people. "The purpose of a banana republic is commercial profit by collusion between the State and favoured monopolies, whereby the profits derived from private exploitation of public lands is private property, and the debts incurred are public responsibility".


America The Banana Republic. Retrieved on march 2011 from: 
 http://www.vanityfair.com/politics/features/2008/10/hitchens200810

The author is comparing India with a Banana Republic, because the power is concentrated in a small group of people, the corporates (even the media is a corporation). They manage and manipulate things around India to their convenience and for their benefit, also with the cooperation and participation of some government officials. As is show in the article: “Large contracts being awarded, conditions of contracts becoming a little vague, eligibility of capability being abused”.

3. Why is it problematic that in the business world “The Media” becomes a corporation?
The media has the objective to inform and educate through the information they give and the interpretation they place over this information, influencing the perception that people have from diverse topics.
As a corporation it main objective will be to earn profit for its owners, managing they power to favor certain group of people in their convenience. As a consequence the information and it interpretation they give to the public will be biased according to their interests, without considering the real issues that must be taken into account in a country.



Corporate Corruption. Retrieved on march 2011 from: http://www.cartoonstock.com/directory/c/corporate_corruption.asp


4. In this situation, what behaviors are considered unethical for corporations, journalist and the state?
They all work based in their crony relationships managing the interests of a whole society, according to their own convenience. They put their economic and personal interests over the pubic interest and welfare of the society.
In the case of the journalists they distort the information to favor their own interests and relationships, not being loyal to their profession and to the people that follow their publications. As the author says: “The media are mostly stenographers to power, especially corporate power”.
In the case of the government they fail to provide its function as a protector of the public interest, instead they allow the existence of these crony relationship and in fact they are part of them. They “play” with the public resources of the State to favor a little group of powerful and wealthy people.
In the case of the corporations they manage the whole country at their convenience, manipulating the media (choosing for example the publication of an article regarding and issue or not, or a interpretation that must be done according to a specific issue) and the government (influencing some decision over the concession of certain contracts or the people that must be in certain politic positions) to gain as much profit as they can regardless of the cost for the “people of lesser power”. As the author says: “From pitching for licences, mines and spectrum using money and media power to pitching for ministerial candidates and portfolios by the same methods is not a huge leap”.

Do Corporations Have A Responsibility To Society? 
Retrieved on march 2011 from: http://rosemarysalum.blogspot.com/
  
5. What can The Media, Corporations and the States do in order to behave ethically and in the benefit of the people and not their own interest. Give at least 5 good ideas.  
I think more than the media, the corporations and the state are “the people of lesser power”, the ones that see all the consequences of the unethical behaviors, the ones who must do something to pressure the behavior of these entities to the common benefit. We must be critical with the information we receive everyday by the media, creating our own opinions, not believing everything they said and demanding them qualified and objective information. We also must be very selective with the products or services we chose, supporting those corporations that take seriously the social responsibility and contribute with the welfare of the society. And finally, be very strict with the government, demanding them the accomplishment of its functions and also participating actively in their decisions.  
·         The Media should be objective in the way they give and select the information they transmit, it should be information according to reality and useful for their spectators. For this, the media should not have participation or investment of other corporations, in order to avoid conflict of interests.
·         The Corporations should adopt mandatory Corporate Social Responsibility programs, investing a certain percentage of their revenues in the benefit of society.
·         The State should create more strict rules in which they regulate the media and corporations, for example demanding to the last one that a percentage of their revenues must be invest in SCR programs . Also they should not allow the participation of their members in Media or in the ownership of the corporations.



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