Comparative Business Ethics and Corporate Governance

This article discusses the case of former Malaysia's Prime Minister, Najib Razak, and the mismanagement of public funds. It analyzes the principles of good corporate governance and ethical decision-making processes. The article also explores different moral philosophies and their relevance to the case.

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COMPARATIVE BUSINESS ETHICS AND CORPORATE GOVERNANCE
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Introduction
According to an article done by The New York Times on May 17, 2018, the former Malaysia’s
Prime Minister, Najib Razak’s residence is under police raid over investigations going on related
to the mismanagement of public funds. The police carrying out the investigation are said to have
seized more than 340 bags and boxes containing designer handbags, cash, and some jewelry. The
haul that were recovered from a total of his three residences include 284 boxes of fashioned
designer handbags and more than 72 pieces of luggage containing cash. A study done by Overall
(2016) the former Malaysian leader is accused of embezzling the funds at a government
investment fund, 1Malyasia Development Berhad. The authorities in Malaysia argue that Mr.
Razak and his wife Rosmah Mansor were the main suspects in the scandal that robed the country
over $7.5 billion that mysteriously disappeared from the accounts of the government fund. It is
alleged that Rosmah, the wife to the battled former prime minister used to appear in public
functions putting on expensive jewelry and fashioned clothing as well as customized. The United
States Department of Justice made more other allegations that Rosmah’s son, who was the
former prime minister’s step son might have used the money from the crippled government fund
to produce movies such as The Wolf of Wall Street. The America’s legal system is said to be
interested in the case to be able to recover money that might have been laundered through some
financial institutions in America, money said to be in excess of $1.7 billion (Stockall & Dennis
2015, p. 9).
The article states that based on these accusations, the former leader, whose party ruled the
country for more than 61 years, has suffered some setbacks such as the famous recent defeat in

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his bid to be re-elected. It is said that the opposition, led by Mahathir Mohamad, used the
accusations laid against Mr. Razak to convince the public to vote the regime out. Another
consequence of the scandal on Razak and the wife is the fact that they have been barred from
leaving the country as this would jeopardize the process of seeking justice.
The accusations on Razak had been a public outcry in Malaysia some many yeas now under the
leaders rule. The former prime minister was accused in 2015 of channeling over RM 2.67 billion
from the government trust fund into his personal account. It is well known that the fund,
1Malysia Development Berhad (1MDB), was established and wholly owned by the government
through the ministry of Finance Incorporated Malaysia (MOFI). This strategic development
company was meant to steer head project that would have long-term benefits to the citizens and
promote direct international investments into the country (Westphal 2016). Some of the areas
target when forming the now defunct development fund include agribusiness, real estates,
energy, and tourism.
1Malysia Development Berhad (1MDB had several achievements such the acquisition and
improvement of three independent power producers. The fund is currently engaged on some
other mega projects like the Tun Razak Exchange and its sister project known as the Bandar
Malaysia.
The government fund however started facing a lot of criticism and scrutiny from the year 2015
when people started suspecting some dubious and fishy transactions within the state owned
strategic company. The situation was made worse when there were evidence of laundering
activities within the company. The United States Department of Justice at one point filed a
lawsuit claiming that more than US$3.5 billion could not be accounted for in the company and

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there was possibility of theft. The then opposition leader, Anwar Ibrahim, questioned the
credibility of the company protesting that the documents held by the company commissioners
showed that the company had no business address nor any appointed auditor.
The publicly filed accounts showed that the state controlled firm was struggling in debts of more
than US$11.73 that were mostly accrued the state-guaranteed bond issue done in 2013. All the
above mentioned transactions were done without public approval and were mostly leading the
funds into the accounts of the former prime minister and people who were considered close to
the government.
Good Corporate Governance
The former Prime Minister, Mr. Razak, was entrusted by the public to oversee and control the
state-owned development fund for the benefit of the citizens. Ciulla, Knights, Mabey, and
Tomkins (2018) found out that under the good corporate governance principles, the leader ought
to have upheld the following elements.
1. Rule of Law
The stakeholders should be protected by fair legal framework enforced by impartial
regulatory body which was lacking in the company under Mr. Razak.
2. Transparency
The management need to provide the stakeholders with information regarding policies
and practices of the company, and it should be passed through a freely available and accessible
media. This rule lacked as the transactions were done without informing the citizens who were
the main stakeholders as in the study done by Lopes, Walker, and da Silva, (2016).

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3. Responsiveness
The corporate body should serve the interests of the stakeholders, citizens, not individuals
as in the case of 1Malysia Development Berhad (1MDB under Mr. Razak.
4. Consensus Oriented
The body, 1Malysia Development Berhad (1MDB, ought to have had consultations to
seek the interests of the stakeholders before engaging in any business.
5. Equity and inclusiveness
1Malysia Development Berhad (1MDB) should have engaged and shared the benefits
equally among the right beneficiaries not channeling the corporate funds into personal accounts
as the leader did.
6. Effectiveness and Efficiency.
The processes implemented by the corporation to serve its stakeholders should make
good use of the available resources and yield good results not like in the case of 1Malysia
Development Berhad (1MDB) under Mr. Razak where only person gain from the guarantee of
state bonds Marta et al. 2012.
7. Accountability
The company should have been able to explain to the citizens how the corporate funds
were used and for what intended results, the management of 1Malysia Development Berhad
(1MDB) under the former prime minister could not account for a large amount of money
(Hudson 2017).

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8. Participation
The former leader considered 1Malysia Development Berhad (1MDB) a personal
property, manipulated the management and never allowed the participation of the stakeholders as
required by the principles of good corporate governance.
Ethical Decision Makin Process
As quoted by martin Cohen, ‘Ethics is about choices which matter, and choices which matter are
dilemmas’. Ethical dilemmas are normally complex conditions where ethical standards go
against each other. In such situations, ethical decision making process enables us take right
course of action and analyze the decisions made by other people who may be our college or
competitors as indicated by (Stockall & Dennis 2015). In ethical decision making process, our
ethics are the personal set standards that determine whether an action is wrong or right. The
process takes into account various rules, standards, and virtues that guide the judgment or actions
to be taken.
Steps in ethical decision making process
 Identification of the Ethical issue
Gawronski, Armstrong, Conway, Friesdorf, and Hütter (2017) maintained that the main purpose
is ethical decision making is to help solve an issue deemed as unethical. The decision maker
must therefore be able to notice if there is possibility of violation of any societal norm, ethical
standard or organizational principle. As in this case, the violation of labor rules regarding
minimum wages and the working as well as living conditions of workers.

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The decision maker should also determine if there are possible consequences of the
violation that should be avoided such as poor sanitation and lack of proper health services.
 Gathering of Relevant Information
The decision maker is required to collect as much information as possible concerning the ethical
value being violated, the victims and determine the extent of the vice. He or she would then seek
information on the amount of ham the violation inflicts on the victims. In the case of Assam, the
decision maker would want to know the level of suffering the workers undergo.
 Evaluation of the Gathered Information.
Beekun, Stedham, Westerman, and Yamamura (2010) argued that the collected information
should be subjected to some level of standards to avoid being bias at the point of making the
decision. It should be noted that some victims may give skewed pieces of information due to
emotional touch inflicted. The decision maker should be able to identify if justice was denied or
not.
 Consider Alternatives
The decision maker should take into consideration the specific virtues relevant in the situation
and consider what other people who have decided on in the same situation (Okhmatovskiy, &
David, 2012). He or she should remember that the decision would have impacts in future as some
future judgments would be based on the decision he or she is making. One should be creative to
make sure the decision being made is not as a result of some pressure either side. Make sure you
have exploited all the possible alternatives.

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 Make a decision
One should make a decision based on the evaluations made at step three, a course of action
supported by the theories governing ethics and be ready to face any opposition or challenge that
may arise due to the decision made.
 Take Action or Implement the Findings
In a bid to truly resolve the unethical act, the decision maker should implement the findings as
per the information collected.
 Action review
After taking action or implementation of the decision and the results known, one should review
the process. If the intended results are not achieved, the decision maker should adjust or repeat
the whole decision making process.
Ethical Moral Philosophies
A research done Beekun, Stedham, Westerman, and Yamamura (2010), this is a branch of
philosophy that tries to understand what is referred to as right and wrong. It should be
understood that people do things, take actions or make decisions for reasons that are controlled
by different factors. Moyn (2016) denotes that the reasons which dictate the decisions we make
may be based on standard societal principles or sometimes our decisions are guided the expected
results or consequences of the direction or action taken. Decisions determined by the expected
consequences can still differ depending on whether the expectations are meant for personal gain
or for the benefit of a big group. What are called moral ethics that govern our decision making

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process are as explained in the subdivisions bellow. Aguilera, Judge, and Terjesen (2018)
reiterate that this breached ethical principles of corporate governance.
a) Teleology
A study shown in 'Contesting Teleology as Literary Interpretation' (2017)indicated that this is a
moral philosophy in which an act or decision made is justified as right or wrong, acceptable or
unacceptable depending on whether it will produce the intended results. It is also referred to as
consequential moral philosophy and can be divided into two parts;
i. Egoism, when the intended results are to serve the interest of an individual. Westphal
(2016) found out that Enlightened Egoism is a situation where an individual considers
others but with some target personal gain. For instance, a politician assisting poor child
with school for fame.
ii. Utilitarianism is when a decision is made for a result benefiting a large group of people
(Gustafson 2013). This is the type of moral philosophy that the management of 1Malysia
Development Berhad (1MDB under Mr. Razak would have considered instead of the
egoism they applied.
b) Deontology
Kriegstein (2015) stated that this is type of moral philosophy that considers the right of the
individuals affected by the decision, it states what needs to be done and that should not be done
regardless of the consequences. For instance, teleology would recommend some corporal
punishment for a robber for the victims to get justice, such punitive actions would violet the

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rights of the suspect. Deontology would not allow such kind of punishment even if the intended
result serves the interests of many people, victims.
c) Relativist
This moral philosophy states that ethical issues are complex and the decision made depends on
the decision maker’s experience, there is no ethical philosophy which universal as explained by
Block, Tietjen-Smith, and Estes (2015, p. 56). For instance, the fact that bribery is acceptable in
some cultures does not mean other cultures should not rightfully prohibit. It is the direct opposite
of moral absolutism which claims that there is always a specifically right way or answer to every
ethical situation (Hawley, Crowe, & Mooney, 2016).
d) Virtue Ethics.
According to (Alzola 2015), this type of moral philosophy argues that what is morally right is
not only what may be right according to the situation but a decision that would be a morally good
person. For instance, a victim of robbery may be right to kill the thief, but would decide not to
kill the suspect as he would not want to be associated with taking someone’s life.
e) Justice
This is a moral philosophy that mostly refer to fairness in decision making as explained by
Bailey, Merritt, and Tediosi (2015, p. 8). There are various categories of justice as illustrated
below.

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i. Social justice is a belief that everyone deserves equity in economic, social, and political
opportunities irrespective of their background or gender, Edwards, Delany, Townsend,
and Swisher (2011).
ii. Distributive justice requires that people be subjected to equitable resource allocation.
iii. Retributive justice seeks to punish wrongdoers but in a way.
Conclusion
From the article and the illustrations on the moral ethical philosophies, it proves difficult to judge
a person’s decision. People make decisions based on very varying factors that we may only come
to understand if the decision maker explains, hence the relativists’ version. But on the contrary,
some ethical issues whose decisions affect many people, as in the case of 1Malysia Development
Berhad (1MDB) under for Malaysia prime minister, need to be very specific on its intended
results. In such cases many live are affected and therefore utilitarianism needs to be employed
not egoism as the case with Mr. Razak, where the public funds ended into the pockets of a few
individuals.
Appendix
Link for the article https://www.nytimes.com/2018/05/17/world/asia/malaysia-najib-razak-
handbags-corruption.html

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