The always good China Law Blog has run a series of excellent posts on corruption in China, with excellent practical advice and discussion of the “how” and “why” Western firms get caught up in the corruption game in China (e.g., click here).

But aside from the legalities the we attorneys tend to go “ga-ga” over and love to debate, here are some points from the China Economics blog that likely relate to your economics classes with Dr. Williamson and/or Dr. Marlow.

• Yes, a number of economics papers have been written on how corruption has a negative effect on Foreign Direct Investment coming into a given country. No surprise there.
• And yes, per what is called the “reputation effect”, corruption damages the reputation of a country/locale, and this may be one reason countries like China like to keep publicity about corruption to a minimum. (Yet as the CLB has rightly noted in a number of its posts this year, China’s reputation as a “wild west” (or “wild east”) is improving for the better in this regard — e.g., click here and here).
• However, how does one then explain the “speed money” theory, which posits that high corruption levels actually act to attract FDI when investors believe that well placed bribes will speed up certain processes (which may then result in increased in economic growth - and hence, why would a given government have the incentive to root out corruption?!)

In your view, are Western firms who stick closely to their morals and ethical standards at a competitive disadvantage to local Chinese firms who take corruption short-cuts? (And for the business haters out there in blog land, don’t be ridiculous — I am not advocating that this justifies doing business in such a manner.)

Through the above I hope you can you see why in an academic/case study setting it’s easy for all of us to say, “Well, of course, to agree to corruption and bribes is crazy and I would never do that,” yet in real life, Western firms get caught up in these debacles again, and again, and again and ….

And because they do, it is highly unlikely that those of us in the legal profession will run into a shortage of business clients who need representation in such matters anytime soon. We, and our children and their private schools, and our massive California mortgage payments thank the businesspeople of the world, profusely, for these repeated missteps. Hate lawyers and want to get rid of us? One possible way is for employees, managers and CEOs to exercise better judgment in their decisions and chances are you will cut your appointments with us in half. Kidding, of course, but don’t shoot the messenger.

Finally, one of the great ways to make these types of issues come to life and enhance learning is to personalize them. So let’s leave the subject of multinational corruption in China and turn back to student cheating, a subject I recently posted on (34 Business Graduate Students at Duke University Face Discipline for Cheating).

Today’s Wall Street Journal ran an excellent follow up article to its original reporting on this event — Their Cheatin’ Hearts: You Call it Copying, Students Call it Collaborating, which has some wonderful discussion of some of the theories as to why such behavior abounds.

Does the economic theory that explains corruption at the multinational-country level also explain student cheating at the academic level? See what Professor Marlow has to say on this issue as an economist.

The following is a quote from the article that really resonated with me:

“[The cause of the increase in cheating in today's society and educational system ...] is not technological or pedagogical — or ideological, as is charged in the case of business schools — but cultural and moral. Fewer and fewer students seem to believe that cheating violates their own internalized standards of honesty and good character.”

Amen, amen, and amen.

Professor Carr “extra soapbox and editorial note”: To be fair, I am not suggesting that we just pick on students here — I would argue the same can be said about CEOs, managers, priests, professors, administrators, firemen, artists, garbage collectors, farmers, government officials, engineers, real estate developers, wine makers, insurance salesmen, fisherman, attorneys, accountants, etc., etc., etc. Heck, is any one class of people or professionals immune from this statement? I don’t think so …

The above quote also is a strong argument, in my view, that we can’t solve ethical problems and lack of judgment simply by inserting an ethics course or two into a curriculum or an ethics component into a series of MBA courses. The do-gooders out there who believe that such a strategy will solve the problem and that is “what business schools need to do more of” are unrealistic and have their heads in the stars.

In my view, it is silly to blame ethics courses or those professors who teach them, or business schools in general, for the failings of corporate America or society. Nobody blames accounting professors for Enron, nor do we blame finance professors for missteps in the investment banking community, nor do we blame English professors or English departments when somebody writes a crappy book and/or can’t write a sentence to save their life, nor do we blame College of Agriculture professors for farmers who overly rely on chemicals in their crop production, incur crop failures or plant a crop in the Central Valley that makes little sense to plant there and that would never be planted there without subsidies, political water allotments and overall lack of a free market, nor do we blame College’s of Engineering or computer science professors when a software program crashes and causes chaos. Need I go on?

Thus, I am unwilling to pin the blame for ethical lapses on business schools, ethics courses and/or ethics professors, and I will push back every time against such flawed logic, and this why I see the above WSJ quote as so very powerful … and true.

We do in business schools all we can do for our students — refine their skills re: ethical issues spotting, provide them with ethical theories and models to analyze the problem (e.g., utilitarianism, natural law, legal positivism, social contract, etc.), and then the rest, my friends, is up to them ….