Russian Business Ethics

To many Russian businesses, business ethics remain terra incognita. Even some entrepreneurs who decide to enroll in time-consuming and expensive MBA programs view business ethics and social responsibility as obstacles imposed from outside. Among the painfully few structures in St. Petersburg that possess relatively solid experience in teaching business ethics, each follows a strategy of its own to reach the common goal -showing that business ethics is in fact an effective tool to make a profit. Experts in the field are convinced that as businesses become longer-term profit oriented, ethics will naturally become an indispensable component. However, they add, by teaching ethics extensively in MBA programs the process can be catalyzed.

Acknowledged business ethics specialist Yury Blagov, head of the International Management department at St. Petersburg State University's School of Management, said that until the end of the 1990s, business was seen as unethical by definition. Business ethics were seen not as a vital yet ordinary element of business development, but as a "separate valuation" mainly connected with the morals of society as a whole. Still lacking, Blagov said, is a clear indication that ethics are closely linked to social responsibility, the latter often being misinterpreted in a narrow sense as charity. On the other hand, Blagov said, just a few years ago the Education Ministry included business ethics as a mandatory component into the MBA Business and Society course, which signaled a better understanding of the subject.

Three fourths of the open joint-stock companies that participated in the Training Needs Assessment for Business Ethics and Corporate Governance Improvement survey conducted by the Center for Business Ethics and Corporate Governance, or CFBE, last December expressed a need for business ethics training. Survey respondents most consistently considered bribes, dissemination of confidential information, and theft as the most serious violations of business ethics principles.

"Business behavior in Russia remains uncultured," said CFBE director Alla Vinnik. "We are positive that business ethics must be taught," she said.

In Blagov's opinion, business ethics, meaning "a set of informal rules created and shared by businessmen," always existed in Russia's emerging market-oriented society. In the example given by Blagov, in the 1990s, consumer electronic dealers often used "gray" importing schemes, since rejecting such schemes meant loss of competitive edge. There used to be a whole system of "black," "black-gray," "gray-white" and other schemes accepted, and businessmen who refused to use them would be squeezed out of the market. Such developing game rules were amoral from society's standpoint, but could be explained as "ethical for business of that time, Blagov said. But now that a more adequate, stronger legal system has been created, "white" schemes are becoming more favorable, he said. "Ethics and the law are always tightly linked," Blagov added.

The MBA program taught at the School of Management views ethics as a set of expectations that various stakeholders have. It is accepted that no ideal ethical solution can be reached because many players have contradicting expectations, both rational and irrational. Blagov believes that trying to dictate standards that do not correspond to the situation that businesses find themselves in today is harmful for their development.

At the School of Management, businessmen learn to elaborate a set of ethical norms of their own, in other words, they learn to react to actual outside expectations in ways that lead to sustainable development. This is the way Russian businessmen learn to see ethics as a powerful business instrument suited to today's Russia, and not just a fashion trend, Blagov said. If the ready-made American or other western ethical standards are applied there is always the risk they may prove to be irrelevant in local conditions, Blagov said.

Yet it makes no sense to reinvent the wheel, Vinnik of CFBE said.

Internationally accepted standards and codes are reliable and they need only be adapted to Russian norms, she argued. CFBE offers short-term training courses by independent tutors working directly with companies. "I know Russian companies that successfully work to international standards. They select their staff on the basis of these standards, and this allows them to keep on the mark," Vinnik said.

The Stockholm School of Economics, or SSE, puts its confidence in the personal maturity of the students. "The Swedish mentality does not tolerate pressure. We aim to prepare the next generation of leaders, and therefore we generate knowledge that can be applied not only today, but also tomorrow," SSE's Margarita Adayeva said. Professors teaching at the SSE MBA program are foreigners and no Russian case studies are discussed since Russia is not viewed as a developed country in terms of business ethics. The emphasis is put on value-based leadership, and it is stated that the business leader is the carrier of ethical values. Students spend a lot of their time in class discussing good practices. One example given by Adayeva was the case of the U.S. Shell Corp.

At the School of Management, on the contrary, it is explained in the Integrative Social Contract Theory course that there are national, regional and industry-specific peculiarities in the current business ethics in various parts of the world. Blagov said it became possible to speak of good practices in Russia around 1999, and two examples would be Cherepovets-based steelmaker Severstal and St. Petersburg-based Otis Elevator Russia.

"Our main task is positive self-identification of Russian businessmen. By and large, no country has an ideal ethical system," Blagov said.

"Ethical problems can not be segregated by national identity," said Adayeva. "Everything is based on the way money and property are treated in a particular society. As opposed to the developed economies, it is characteristic of the developing economies to have insufficient respect for private property," she said.

Multiple attempts to create universally suitable codes of ethics, such as the Caux Roundtable Code of Ethics recently drafted in the French town of Caux, can only be regarded as recommendations, Blagov said. Russian business creates its own ethics step by step, he added. In Blagov's view, when choosing an MBA program it is always important to pick the one that reflects the expectations in the market where the student plans to work. If you see that an ethics course is named something like "Business Ethics and Etiquette," discard it immediately, he warned. "Ethics is not about which color of socks to wear," Blagov said.

"In the course, I acquired an absolutely new view on business and society, a wider view," one of Blagov's graduates, director of local consulting firm SMT Development Anton Avdeyev said. Avdeyev emphasized the concept of mutual expectations of the parties involved.

"The main thing I got from the course is the idea of being honest. Be honest with yourself, with your staff, with partners and competitors," an SSE graduate, branch manager at Vitrina A Advertising Group Sergei Mitrofanov said. "It is not the easiest way to do business within Russia at the present time. But on the other hand, our honest behavior will help to establish long-term relationships [at all levels]," he said.