Ethical Leadership and Its Challenges

Key to successful entry and operations in China should be focused on the possibilities of what business can do to exploit fast expanding, affluent and limitless consumer market. Way to do successful business in China is to find Chinese partner that shares the company's ethics and operational values. If the partner has same business principles, company could adjust to China's unique culture and marketplace more quickly.

Although positive economic and social results of industrial growth have been accompanied by serious corruption and environmental degradation; to some extent recent Chinese problems are analogous to those of early industrial Europe. With the episodes such as the skin rashes in children and tainted baby milk and skin allergies, it is in China's interest to promote rule of law.

The Chinese are like businesspeople everywhere: They view honest personal relationships as the foundation of trust between partners. Just as we want to know them intimately, they want to know who we are as people, how we view them and their culture, and how we would handle ourselves in every business situation.

While operating abroad, it is in the interest of the global companies to adjust their usual methods of doing business, its managers must have working knowledge of social sciences, geography, politics, sociology, psychology, and economics of the host country.

Ethical Leadership and Its Challenges

There is a conflict in beliefs, cultures and management style, while Kim is busy developing supplier's network and wanting to speed up R&D activities, he loses focus on management and supervision. His dependence on mutual trust and insufficient chain of command has led to inappropriate use of factory assets, and utilization of machineries for personal gains. Below are some of the observations made that led to the management meltdown and allergic outbreak.

 Raymond Kim Lacks Leadership

 Different Corporate Cultures at DynaCoat and CreaseFree

 Employees Setting Their Own Rules and Ignoring Applicable Laws

 Missing Warning Signals

 Lack of Attention and Missed Radar Signals

 Finally, Kim Wakes Up

Raymond Kim Lacks Leadership

Knowing that staff at newly created joint venture CreaseFree and Dynacoat, AccuForm disliked the idea of having to report on their social and environmental committee assuming it did not have any impact on environment, treated ISO certifications as window dressing and suggestion to Kim that written rules could be bend, should have send warning signals to Kim about ethics training needs, instead Kim practiced laissez-faire style of management and expected staff to be self-disciplined. Although Kim is competent, but his style of management is passive for the situation, Kim should have been firm to establish an ethical corporate culture, company's values and expected behavior.

Result: Kim's tolerance towards unethical behavior and his hands-off management was taken as a sign of acceptance by local employees and it was perceived that written rules could be flexed to achieve goals.

Separation of Duties and Unrestricted Access

Other factor that contributed to the failure of AccuForm is the "separation of duties". Separation of duties is a key concept of internal controls. It can prevent conflict of interest, fraud, abuse and errors. Separation of duties restricts the amount of power or influence held by any individual. All the staff at supervisory level and higher ranks including Ching was given access to research labs, production plants and corporate resources during non-working hours and engineers has unrestricted access to chemical substances for use in lab experiments. This led to improper use of laboratories and products stored there.

Progress monitoring tools were not adequately employed; team leaders were required to submit progress reports monthly only knowing that things can dramatically change in days in research and development arena and the process was deployed in such a way it ignored the accuracy of the progress and reports and did not check if work was being performed according to the plans.

Missing Warning Signals

Also, Kim trusted staff at AccuForm without justification. Much of the staff in research, development and manufacturing came from CreaseFree in Hong Kong. Kim deviated from the company's philosophy of doing in right and went along local management that "winning is everything". Literature shows that people selectively form their personal characteristics, communication styles, and preferences from both individualistic and collectivistic cognitive structures under different situations (Triandis, 1995). Kim lacked organization, staffing and controlling.

Kim has larger goals for the company but never discussed them as to how company will achieve them. Employees who don't understand their roles in company's success are more likely to become disengaged. Employees should be able to articulate exactly how their efforts feed into the broader company strategy.

R&D teams were given increased authority and cash rewards for good performance. By taking a hands-off approach without setting ethical standards and guidelines, he encouraged the culture of mismanagement leading to unethical behavior at AccuForm.

Different Corporate Cultures at DynaCoat and CreaseFree

While DynaCoat strives to exceed legal, environmental and social expectations, CreaseFree is at ease by meeting basic legal obligations. DynaCoat holds its employees to strict codes of conduct, professional integrity, safety and environmental protection, DynaCoat is the ideal corporate citizen, but, CreaseFree has values that are at odds with DynaCoat's. CreaseFree's goal is low cost leadership by any means within the applicable law. CreaseFree's business culture depends upon personal connections including gift giving, favors, and kickbacks, and is considered acceptable business activity to accomplish business goals.

Raymond Kim could have saved the reputation of the company by establishing strict, formal standards that combined the values of both companies in mutually respectful ways, by reducing reliance on mutual trust and staying with corporate policies, understanding Chinese work culture and focus