An overview of business ethics in Vietnam
Business ethics is a relatively new issue in Vietnam .
As the other issues like business culture, corporate culture, etc., issue of
business ethics began emerging after the market economy reforms were made in
1991, when Vietnam
started to join in the internationalization and globalization process.
Previously, in the centralized planned economy, the issues were never mentioned
in Vietnam .
In a command economy, all business activities were conducted by government orders.
Through such orders, ethical conduct was considered as completely obeying the
higher authorities’ instructions. There was a shortage of almost all kinds of
goods, those being successful in buying goods were really lucky, thus nobody
could afford to complain about the goods’ quality. Because supply exceeded
demand, service quality in the distribution network was quite poor; customers
had little chance to complain about it. At that time, industry in Vietnam
was underdeveloped, there were limited numbers of manufacturers, and
furthermore nearly all of them were state owned, thus, there was no need to
consider such issues as trademarks or intellectual property rights. Most
employees were working for the state, where the discipline and bonus system
were unified and simple. There were not any strikes or labor conflicts to deal
with. But since Vietnam
has joined in internationalization from 1991, there were new issues coming up
such as: intellectual property rights, food safety regulations, strikes, stock
market, etc.,…and thus the issue of business ethics became more popular to
society. The author would like to present some preliminary findings of business
ethics in Vietnam .
These findings are based on information, collected from Vietnam as well as foreign literatures.
Vietnamese awareness of business
ethics issue
As the above-mentioned factors, business ethics is still
relatively new issue in Vietnam ,
not only for businessmen but also for intellectual people. Till now, there were
very rarely books about business ethics, most of them were translated from
American books. Maybe the 1st academic book of this topic in Vietnam was
“WHAT'S ETHICAL IN BUSINESS?” by Verne E. Henderson, published by McGraw-Hill
Ryerson Ltd in January 5, 1992; the book was translated into Vietnamese by Ho
Kim Chung, published in Vietnam in November 1996 by Nha Xuat ban Van hoa, but
its content and translation were not adequate and didn’t bring about many
attentions even between intellectual people in Vietnam. Recently, there were
more articles on this topic, especially in Chungta magazine (an internal
magazine of FPT group, a leading group of IT in Vietnam , www.chungta.com) or
Diendandoanhnghiep newspaper (a newspaper for businessmen, issued by Vietnam
Commercial and Industrial Chamber – VCCI, www.dddn.com.vn) and some other
magazines or newspapers, such as Saigon Times, Laodong, etc. But the articles
mostly discussed about some recent events in Vietnam , relevant to business
ethics or provided some cases, taken from foreign newspapers, magazines,
without any deeper research of business ethics or business ethics definition.
In most Vietnamese high schools and universities, business ethics is not taught
as a subject in their curriculum or only as an elective subject. Business
ethics is not even mentioned in the texts of other related subjects, such as
international business or business management. However, sometimes it is
mentioned, but done so very sparingly. The most common thinking about business
ethics is that it’s compliance with the rules! In most Vietnamese high schools
and universities, business ethics isn’t taught as a subject in their curriculum
or only as an elective subject. Business ethics is not even mentioned in the
texts of other related subjects, such as international business or business
management. However, sometimes it is mentioned, but done so very sparingly, as
business ethics is to comply with the rules! This misconception and very short
idea on what business ethics are leads to a narrow and underdeveloped idea of
what business ethics should be concerned with. Recently, under pressure of
globalization, Vietnamese mass media mentions business ethics quite frequently,
but it doesn’t provide any official definition. As a result, even though people
often hear about business ethics, their understanding of the issue is still
very vague. The vague understanding of business ethics is the main reason
leading to the shortage of business ethics enforcement in practice.
Corporate social responsibility
To study the issue, it is necessary to focus in two
dimensions: Corporate responsibility of production quality and corporate
responsibility in environment protection. The 1st question was set up as: “What
would you do, if your company gets the information that in one lot of company’s
production, some one has switched fault production, harmful for consumers, with
true one but no one can recognize the fault production by outward aspect?”
The question is based on a true story in Chicago in 1981. Someone put poison in
some bottles of Tylenol pain
reliever produced by Johnson & Johnson (J & J) that were being sold in
supermarkets in the Chicago
area, causing the death of 7 people. The police never found the person
responsible. Although this scandal happened only in Chicago
and security authorities thought that the person only put poison in some
Tylenol at those supermarkets, the managing board at J & J insisted on
withdrawing all 31 million bottles of Tylenol bottles distributed not only in
the US
but also all over the world for verification. This decision cost USD $100
million but the high social responsibility along with an effective PR campaign
helped J&J earn back its’ market share in 6 months. But in a survey, only
42 people, equal to 42%, chose the variant: “To withdraw immediately the production,
despite a finance loss”, 50 people, equal to 50% selected the variant: “Put a
notice up in every selling place and let the customers make the decision to buy
or not”; and 8 people, (8%), decided on the variant: "Do nothing, because
it is not the company’s fault! “
The 2nd question is: “What is your opinion, when a
Vietnamese company exports soy bean sauce with a 3-MPCD rate that complies with
Vietnamese regulations but exceeds EU permissible levels many times over?” It
is also based on a fact that in 2002, a Belgium newspaper warned its citizens
against using Vietnamese-made Chinsu soy sauce, because of an analysis made by
the Belgian Food Quality Agency indicated the soy sauce contained 3MCPD – a
chemical contaminant known to cause cancer in animals and kidney damage – at an
unacceptably high level of 86 mg/kg, exceeding the EU permitted level of 0.05
mg/kg nearly 200 times over the limit. But Chinsu denied its responsibility
because they said Chinsu didn’t export soy sauce to Belgium . The soy sauce could have
been re-exported to Belgium
by another company or it could have been an imitation. Moreover, a 3- MCPD rate
in Chinsu soy sauce exceeded the EU regulations but remained within Vietnamese
regulations! This incident has alerted the appropriate Vietnamese authorities
and consumers to the harmful effects of 3-MCPD in soy sauce. The production
used to be considered very safe because of its natural origin. It is also a
fact leading to a scandal in 2007, when 90% of the Vietnamese soy sauce
producing enterprises was found guilty by the appropriate authorities for
violating food safety regulations by exceeding the permitted 3-MCPD levels.
This incident has almost ruined the industry in Vietnam .
Since this time all soy sauce companies are required to put a statement on
every product: “No 3-MCPD” in their product to ensure customers of the safety
of the product. Perhaps due to this well known fact, the opinion of surveyed
people for the question is more straightforward. 33/100 people considered it as
“Law breaking”, 25 people said: “Business ethics violation” and 42 people
considered it: “Violation in both!” No one considered it a nonviolation. But
the findings also indicate a vague delimitation between regulation and business
ethics, because in fact the company violated both, business law and ethics, due
to fact that when a company exports goods to any country, they should obey the
rules of that country.
The question of the responsibility of entrepreneurs on the
environment can be found
in the facts on numerous foreign
companies investing in Vietnam
taking advantage of the vague and loose regulations on environmental
protection, using technologies that pollute the environment, affecting the
health of workers and the community to reduce costs. There are innumerable
examples of this problem: textile mills without proper cleaning devices
affecting workers and people in the surrounding communities, subsequently,
suffering from lung diseases; footwear factories releasing waste water,
polluting water sources; to name a few. Companies do not have enough protection
equipment for their workers, leading to a high rate of work related accidents.
In these cases, although companies do not break the law, they violate business
ethics intentionally as they are conscious of the consequences completely.
However, the opinions of respondents are quite tolerant and moderate.
Answering the question if a foreign company comes to Vietnam
to establish a factory to take advantage on the vague and loose environmental
laws of Vietnam, only 75 people, equivalent to 75%, considered it an
unacceptable thing, a business ethics violation; 25 people thought: "It’s
acceptable because in doing business people can seize an opportunity”. This
result is caused by the fact that Vietnamese are not concerned with the
environment that much, depending entirely on the law when assessing business
ethics in companies.
The intellectual property issue in Vietnam :
It is such a hot problem, not only in Vietnam but also in most of
developing countries. Violation of intellectual property in Vietnam has a variety of reasons:
Firstly, until the beginning of the twentieth century, Vietnam
was a backward
agricultural country, there were no
achievements in products required to be protected like
industrial designs, inventions, and
therefore, there were no regulations on intellectual property rights. Moreover,
as Vietnam
is a country with a culture that values the community highly, Vietnamese did
not have a tradition of protecting private property. In the feudal period and
even the pre-integrated period, researchers and artists earned their livings by
receiving a salary; the law did not refer to the intellectual property rights
system, fees for an author were very low as they were thought to serve the
community. This issue was only taken seriously from 1991, when Vietnam
signed the TRIPS agreement. However, as the time for implementing this has been
very short, only a little more than 10 years in comparison to the hundreds
years of intellectual property protection rights history in the European or
American continents, the consciousness of the Vietnamese people about
intellectual property rights is limited. One reason for this situation is
economic. For example: Stories about young wizard Harry Potter of J.K. Rowling
are very popular in Vietnam .
In August 2007, as children over the world, Vietnamese children were eager to
wait for the seventh volume - Harry Potter and the Deathly Hallows. But their
parents could be in a big dilemma, if they wanted to respect intellectual properties.
The cover price of an official copy of the J.K. Rowling book was $38 in
Vietnam, against an annual average salary of $600, and illegal copies have been
offered everywhere with about $7!”vi
One way of violating intellectual property, which is quite
popular in Vietnam is that a company brands its product intentionally rather
like one famous product brand to dodge law, making mistakes for consumers, for
instance: a domestic company named their motors as Hongda to imitate Honda, the
very famous brand name from Japan. The result in this question has confirmed
this statement.
Answering for the question: "Give your opinion if a
company brands its product like a famous one", only 16 people considered
it as breaking the law, 37 considered it as violating business ethics and 47
thought it was acceptable because they were not exactly similar absolutely.
What's more, of the 47 people that considered it as breaking the law, there
were 3 out of 20 students, who were educated about this issue. As a result, it can
be seen that intellectual property rights will be an unresolved problem in Vietnam
for a long time.
The relationship between employer
and employee:
Recently, strikes became a serious problem in Vietnam .
Statistics from 1995 up to now have shown that there were more than 1,000
strikes, from big to small. Only in the first quarter of 2007, there were 103
strikes in 14/64 provinces, cities with a population of 62,700 or more taking
turns having strikes. Ðong Nai is the province that had the most with 35 strikes,
followed by Bình Duong with strikes, Ho
Chi Minh City with 26 strikes. 98 out of the 103
strikes were for economic reasonsvii.
The main reasons for the strikes can
be listed per below:
- Unsatisfactory conditions in work
environment, environmental pollution, unsafe and old equipment, and lack of
worker safety conditions, no periodical health checks for workers and
occupational hazards and diseases are the main causes.
- Despite obeying rules of the law,
the salary system is still low compared to the average level of the labor’s
life. Therefore, workers feel dissatisfied with the work place and disloyal to
enterprises.
- Inadequate knowledge of workers
about the Labor Law – It was surprising that this situation happened not only
in domestic private companies, which were regarded to have small capital and
little knowledge about the law, but also in foreign invested companies,
especially those from Taiwan and Korea. According to the Institute
of Workers ’ and Trade Union, over the
last years, 878 strikes have been staged in FDI enterprises, accounting for
70.7% of the total strikes in Vietnam .
A typical case is a strike that happened on the morning of July 25th 2007, at
Linh Trung I export processing zone (Thu Duc district, Ho Chi Minh City ), by 1,300 workers of Danu
Vina company (a Korean wholly owned company) due to the company’s unreasonable
policy. From July 2007, the company gave a salary increase of VND 50,000,
(about USD 3) for 1 to 5 year workers and VND 70,000, (less than USD 4) for 5
to 7 year workers. However, this policy was granted only for workers having
contracts before July of the previous year. In addition, a monthly bonus for
hard working workers of only VND 25,000 (equal to USD 1.5) was given; much too
low as the average meal cost VND 4,000 (equal to 25 US cent) and was of very
bad quality. Thievery, cause by unsecured locks, and bad sanitation conditions
in the company made workers feel more concerned, upset and angry.
To solve the problem, in 2007 the Workers’ and Trade Union
Institute under the Vietnam Confederation of Labor conducted a survey in
localities that are home to many FDI enterprises, including Hanoi, HCM City,
and the provinces of Dong Nai, Binh Dinh, Ba Ria-Vung Tau, Vinh Phuc, Bac Ninh
and Hai Duong. The findings have shown that: in many foreign direct investment
(FDI) companies’, workers still face low wages, long extra working hours and a
hard life. Up to 45 per cent of FDI companies, workers have complained about
low wages; in nearly 16 per cent of the companies, workers were dissatisfied
about their extra working hours. Long working hours and low wages, sometimes
even lower than in private and state owned companies, are the main part of the
problem.
Most FDI workers receive a low salary from VND 800,000 (USD
50) to VND 1,000,000 (USD 62) a month. Thus, only 30 per cent of the workers in
FDI companies can have enough money to offset their daily living costs. To
increase the monthly income for essential daily expenses, 42.5 per cent of the
FDI workers have to work overtime, especially, those working in garment and
leather enterprises. In several garment enterprises, the rate of women laborers
working extra hours has reached 55%, many of them have to work 16 hours/day,
till falling down unconsciousviii. To solve the problem, the
Institute has proposed intensifying inspections and imposing stiff penalties on
companies’ violations of the labor code, including failure to provide social
and health insurance. The Institute also has called for amendments to laws on
settlements of labor disputes and strikes to ensure that the strikes are legal
and protect the interests of both employees and their employersix.
This problem must be solved soon to protect the benefits of
workers, enhance the investing environment in Vietnam and attract more foreign
investors. As the relationship
between employers and employees has
been mentioned in the mass media in Vietnam . Vietnamese law prohibits
employers from refusing to employ female workers that have children. Also,
female workers that have children less than 3 years of age have the right to go
to work 1 hour later than other employees and are not required to work
overtime. However, in fact, this law is only obeyed in state owned companies
while it is ignored in private and FDI companies. When being asked for the
opinion when "A company refused to recruit a female employee because she
had children and/or had a child under the age of 3 but forced her to work
overtime", 25% of the respondents considered it as breaking the law, 67%
of the respondents considered it as violating business ethics, but 8%
considered it all right because all workers have to work equally and that no
one should be given preferential treatment. Thus, it can be understood here
that despite some limitations in knowledge, most respondents have the correct
view on this problem.
The moral rights and duties between
a company and its shareholders
This is a new matter in Vietnam as the Vietnamese stock
market is still in infancy
(less than 10 years old) so that the
regulations on the accuracy of financial reports and disclosed information of
enterprises are not strictly controlled. Thus, recently many
enterprises have disclosed
inaccurate information to gain profit and cause harm to investors.
The first serious case was the false financial report on the
joint stock report of Bien Hoa Confectionary Company (Bibica) in 2002 and the
first 6 months of 2003. As Bibica was one of the first 21 listed companies and
the first listed company in the confectionary industry on the stock market,
based on those false figures, Bibica’s stock price rose very quickly. But in
fact, in an effort to improve its competitiveness on the market, Bibica
simultaneously launched a range of investment projects to expand production,
launching new products (moon cake, layer cake, and built a second confectionary
plant, etc.). As a result, the company’s debt to the bank increased. In
addition, the rise of input materials’ price, new staff in finance - accounting
department drove the company into more difficulties. In an effort to lure more
investors to acquire new capital, the company issued an inaccurate financial
report. When the fraud was discovered, shareholders found out that Bibica has
suffered a VND 10.086 billion loss in 2002 (equivalent to USD 7,500,000),
nearly double the number of VND 5.4 billion that the company executives had
disclosed publiclyx. Indispensably, the share price of Bibica fell
drastically, leading shareholders to suffer dramatic losses. In addition,
Bibica faced penalties for breaching securities administration laws by the
State Securities Commission (SCC) and nearly went bankrupt.
However, as profits in the stock market were so appealing,
similar cases still occurred. Thien Viet was a securities company established
in early 2007 but it drew a lot of attention from investors as Mr. Nguyen Trung
Ha, chairman of Thien Viet was a Deputy Director General of a top company in
Vietnam and in its business registration license, Mr. Pham Kinh Luan, a
prestigious expert in the finance field, was appointed Director General of
Thien Viet. Consequently, though, Thien Viet’s stocks even remained unlisted
but were still sought after by investors. Interestingly, too, Thien Viet’s
board of directors disclosed that the company had signed a cooperation agreement
with Goldman Sachs, a leading finance corporation in the USA (Thien Viet even
showed the cooperation agreement with the signatures of Goldman Sachs’ and
Thien Viet’s Presidents to reporters), the price of Thien Viet’s stocks soared
upwards, increasing much more that the listed price. However, a few days later,
in the Thanhnien newspaper (a famous newspaper in Vietnam ) an article appeared,
saying that Goldman Sachs denies any formal association with Thien Viet:
“Edward Naylor,
Corporate Communications Director of Goldman Sachs in Asia, in his e-mails to
Vietnamese press agencies, stated that Goldman Sachs just established an informal
exploratory dialogue with Thien Viet as we have done with other local
securities companies and has no formal association with this company”.
When asked about the cooperation agreement with the
signatures of Goldman Sachs’ and Thien Viet’s Presidents that Thien Viet has
shown to reporters, Mr. Naylor said that, “Goldman
Sachs sometimes sign similar agreements with private securities companies when
the group discusses opportunities with them and these agreements could not be
seen as the proof on wide ranging partnership”xi.
In addition, Mr. Pham Kinh Luan said that he had not signed
any working contract for Thien Viet. As a consequence, Thien Viet paid stiff
penalties to the HCM City Securities Trading Centre (HSTC) and the State
Securities Commission for being dubious and deceitful. Those who suffered the
most here were investors, who were enticed by the misleading information
released by Thien Viet’s board of directors.
However, these and other wrongdoings are likely to happen
again as the law and the awareness of Vietnamese businessmen about the stock
market isn’t complete. Difficulties or risks are unavoidable in doing business.
Under such conditions, prestigious companies have to call for collaboration
from shareholders in an effort to overcome their arduous time.
Although this could be risky, companies could gain
confidence in their investors and lessen the risk of being abandoned, if false
information was revealed. But in our survey, to respond to the question: “When
the production line of the company is damaged, causing productivity to decline,
and after being revealed publiclyx, this information causes the
company’s stock price to fall, what should the company do?”, only 42% chose to
inform all investors, 50% chose “Keep the information undisclosed until the
production line is repaired” and 8% chose: “Not giving any report or
information except when forced to do so.”
Despite this result seeming optimistic because 92% of the
respondents didn’t intend to conceal information at least for a certain time,
it should be considered as a shortcoming in the awareness of Vietnamese
enterprises.
References
i
Marcoux, A.M (2006), The
concept of business in business ethics, Journal of private enterprise”.
ii
Vickers, Mark R. (2005), Business
Ethics and the HR Role: Past, Present, and Future, Human Resource Planning.
iii
Brenner, S. N. (1992), Ethics
Programs and Their Dimensions. Journal of Business Ethics, 11,391-399
iv
Phillip V. Lewis (1985), Defining
'Business Ethics': Like Nailing Jello to a Wall, Journal of Business Ethics 4 (1985)
377-383. 0167-4544/85/.15
v
Ferrels and John Fraedrich (2005), Business
ethics- Ethical decision making and cases, Houghton Mifflin Company.
vi
Accountants face up to the moral maze”, Ian Fraser, The Financial Times of
January 2, 2008
Retrieved October 24, 2011.
viii
http://www.vnn.vn/xahoi/laodong/2005/11/512631/ Retrieved October 24, 2011.
ix
Laodong Newspaper No 76, www.laodong.com.vn Retrieved October 24, 2011.
x
2002 Vietnam Investment Review Ltd Retrieved October 24, 2011.
xii http://dantri.com.vn/kinhdoanh/Nguoi-tieu-dung-Vietnam-chiu-qua-nhieu-thiet- thoi/2008/6/236945.vip Retrieved October 24, 2011.
Retrieved October 24, 2011.
Không có nhận xét nào:
Đăng nhận xét