Business Ethics in Subsidiaries of Multinational Companies in Countries in the Post-Transition Economic Phase Using the Example of the Czech Republic *

By Pirozek, Petr; Komarkova, Lenka et al. | Journal of East European Management Studies, April 1, 2018 | Go to article overview

Business Ethics in Subsidiaries of Multinational Companies in Countries in the Post-Transition Economic Phase Using the Example of the Czech Republic *


Pirozek, Petr, Komarkova, Lenka, Drasilova, Alena Safrova, Journal of East European Management Studies


Introduction

Ethics connected with moral principles are currently a topical issue in the region of Central and Eastern Europe (hereinafter CEE), and are linked to all areas of public and private life. Within this context the development of business ethics, which are reflected in the creation of an appropriate business environment, is increasingly gaining in importance. Business ethics examine and make use of moral values, principles and standards which determine and control the behaviour of participants at all levels of the business. This is also the basis of their inclusion in the framework of economic theory, whereby business ethics must fulfil the condition of the functionality of the economic system (Šmajs et al. 2012). Definitions of ethics can be found in international works which focus more on a conception of a code of ethics linked with the exercise of a business activity. Here the code of ethics is defined as a corporate statement which sets out the company's principles, ethics, rules of conduct, codes of practice or company philosophy concerning obligations to stakeholders, the environment, and all other aspects of society outside the company (Langloise/Schlegelmilch 1990). The code of ethics covers the company's responsibility towards all interest groups, including employees (Kaptein/Wempe 2002). It, therefore, becomes a theoretically empowering document for eliminating unethical or immoral behaviour and represents a source for evaluating one's own activities, through which it also contributes to a higher level of organizational culture and the related socialization process (Šmajs et al. 2012).

In countries with a market economy, ethics have been developed over a long period and a similar process can be expected in countries where a transformation of the economy is underway or has already taken place. Findings from countries with a developed market economy link some unethical practices to the transition process (originating in the operation of the "black market" familiar in CEE) and the globalization of the economy (Chakraborty 1997). With regard to the primary research connected with corporate ethics in countries in the post-transition phase, these themes most often appear as information in annual reports linked to reports on the social responsibility of firms. Annual reports usually contain all the elements of corporate social responsibility (hereinafter CSR) classified according to the triple bottom line (Kašparová 2011). This is most often contained in the annual reports of subsidiaries of multinational companies (hereinafter MNC), but we also find them in companies with owners from the same country. In relation to this, ethical rules for conducting business and the mutual influence of these rules can be found among MNCs and companies with owners from the same country. We, therefore, frequently encounter discussions which aim to identify global ethical rules, especially with regard to the growth of direct foreign investment and countries' increasing level of involvement in international trade (Payne et al. 1997). There is also a significant level of discussion about the influence of culture on ethics and the associated high-risk nature of investment caused by the entry of MNCs into selected CEE markets (Brouthers et al. 1998). Foreign research into CSR also points to a relationship between CSR and financial performance (Walsh et al. 2003). Research carried out on the largest MNCs has indicated that the majority of them have a code of ethics linked to stakeholders, corporate values and a code of conduct (Kaptein 2004).

This paper examines the ethics of multinational subsidiaries operating in a posttransformation market. It is unlike the other studies we have mentioned which are from countries with a developed market economy, where different trends associated with socially responsible corporate behaviour are apparent (Maignan/ Ralston 2002). This paper presents the issues surrounding the ethics of subsidiaries of MNCs operating in a post-transition market environment. …

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