Business ethics in Saudi Arabia with focus in nepotism.

Business Ethics and Nepotism in Saudi Arabia
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Abstract
This paper aims to demonstrate the business ethics in Saudi Arabia with a keen focus on nepotism as experienced at the marketplace. The study applies the Utilitarian approach on business ethics and analyses business ethical conduct in Saudi Arabia in relation to the business ethics in the United States. The paper also examines nepotism as a noteworthy concern regarding business ethics. It looks at nepotism in Saudi Arabia and recognizes how it is widely accepted by the Saudi Arabian tribal system and culture. Compared to the United States, which has zero tolerance towards nepotism, Saudi Arabia considers it part of the culture. The paper also looks at nepotism from a wider perspective including analyzing the reported cases in other countries such as India, Latin America, Italy, Arab countries and African countries. The findings regarding the negative effects of nepotism inform the recommendations made, particularly to the public sector in Saudi Arabia. A conclusion is made by analyzing the business ethics in Saudi Arabia from a utilitarian approach and demonstrating how nepotism does not represent the utilitarian principles.

Introduction
Justice Potter Stewart once said that there is a difference between what is right to do and what one has a right to do. Isaac Asimov further remarked that one should never allow his or her sense of morals prevent them from doing what is right. Human beings are social animals, and the rules of nature govern their individual and group behavior (Ardichvili, Jondle, & Kowske, 2010).

The rules, which are in the form of behavioral standards, may be culturally different, but the fundamental objectives are to ensure there is peace and mutual existence within communities. These behavioral standards are what is referred to as ‘ethics.’
As argued by few sociobiologists, human beings have inherited capacity to formulate ethical judgments by assessing actions as either evil or good. Within the internal environment of an organization, individuals’ ethical orientation is influenced by the leadership, their ideologies and the organizational structure (Ardichvili et al., 2010). There is a set of ethical standards that monitors and guides an organization. The organization’s norms of behavior are influenced by the internal ethical code of conduct and other external entities including the legal and professional bodies, as well as other public and governmental groups.
Meaning of Business Ethics from a Utilitarian Perspective.
Developed by Jeremy Bentham, utilitarianism is one of the normative ethics whereby the consequences of an action judge its moral value. The utilitarian theory suggests that the right choice in any given scenario is the one that produces the most happiness to the larger population (Kaminski, 2013). Also referred to as consequentialism, utilitarianism determines the moral conduct of an action by conducting the cost-benefit analysis of the consequences. It is about weighing how everybody else will be affected by a project, event or a proposal. If the analysis demonstrates that the positive outcomes are greater than the bad results, then morally, the action would be deemed ethical. On the other side, if the bad outcomes surpass the good ones then the action is considered ethically unsound.
In business ethics, the utilitarian principles are incorporated by carrying out a cost-benefit analysis to inform any decision that should be made. In this regard, organizations attempt to determine how beneficial something is before going ahead with the real action. Ideally, the consequences of the actions should favor everyone involved (Kaminski, 2013). For instance, if it is a new product, then it should benefit the customers, and the company should also make profits from it. It will include creating products that are safe, fit for purpose and offer the value for the money. Thus, businesses should consider evaluating all relevant factors to ensure that all the necessary risks and concerns are put into consideration before making any decision.
Ethical business practice from a utilitarian approach considers both the good and bad consequences for anyone involved. It also emphasizes on equality, avoids bias towards self and calls for objectivity during decision-making. The utilitarian principles that are applied in business ethics include autonomy, beneficence, maleficence and justice (Ardichvili et al., 2010). The principle of justice is about ‘treating equals equally and the unequal unequally’ and it is about zero tolerance to discrimination. The principle of autonomy is about regarding individuals as self-dependent and not infringing on their rights. Beneficence dictates doing the greater good while maleficence is not doing harm or minimizing negative outcomes. Most of the business executives embrace the utilitarian approach to business ethics because it is compatible with conventional thinking in business. Utilitarianism is result-based and seeks to maximize happiness, which is analogous to the business owners’ desire to maximize profits and reduce the losses. The two systems are, therefore, philosophically compatible thus most managers use this principle to run their business with the motivation of doing the greatest good to the larger population.
Literature Review
Business Ethics and Nepotism in Saudi Arabia.
A person’s ethical judgment on any issue is the degree he or she regards it as significant morally. Over the past years, the concern for ethical issues in business has been on the rise among academicians and researchers. Most of the research in organizational ethics has emphasized on the integration of codes of ethics within an organization (Aldraehim, Edwards, Watson, & Chan, 2012). However, creating some form of codes of conduct or ethical standards within a company does not equate to the business being morally upright. Empirical studies have shown that most companies with written ethical standards were mostly accused of inappropriate actions. Thus, business ethics is more of the internal organizational culture than just a written document.
Literature review done on the business ethics in Saudi Arabia argue that the Islamic views inform the business behavior, which has the assumption that generally, the human behavior is governed by innate universal moral conduct. Research further asserts that in Saudi Arabia and the Middle East, in general, the primary source of the legal intricacies and written laws that surround business transactions is Islam. Islam is considered the most paramount factor in shaping the cultural characteristics of individuals and their organizations. In Saudi Arabia, business is not only regarded as a religion that creates the link between people and Allah, but it also organizes the other features of life including business (Rees & Althakhri 2008). The Islamic business ethic is based on Prophet Mohammed’s sayings and the Holy Quran thus business in Saudi Arabia is directly related to the Islamic rules and regulations. With Islam, people are encouraged, to be honest, and just regarding and trade and business. The Islamic business ethics dictate that an individual’s behavior at the workplace either socially or professionally must create a perfect balance between work and social life. Usually, the business decisions in Saudi Arabia have to be passed through a moral filter. For instance, the seller has the moral obligation to disclose to the buyer any defects that a product presents. In Islamic business ethics, laziness is regarded as a vice, and for the society’s welfare, generosity and justice are advocated for at the workplace.
However, the ethical issues are not followed as expected and the documented ideal business practices are contrary to the ones being practiced. It is because the society has been influenced by socialism, capitalism, and secularism, which polarize the religious teachings. The Saudi Arabian work culture is strongly influenced by tribalism system and Islamic values. The culture is traditional, male-dominated, family oriented, as well as very conservative (Fawzi & Almarshed, 2013). The tribal approach in Saudi Arabia establishes an authoritarian structure, which embraces centralized decision-making, hierarchical structures, and open door policy. The business approach is participative and consultative but still the subordinates are not involved during decision making. Saudi Arabians consider delegating some decisions to the subordinates as weaker management style thus the managers and leaders do not incorporate teamwork.
There are issues of political injustices that can explain the gap experienced regarding business ethics in Saudi Arabia. Loopholes in the political and legal systems have resulted in divergent business behavior on some individuals who look for means to survive, particularly in difficult situations. Moreover, the Arab tribal values focus on obedience and commitment to family and work. In this regard, nepotism is openly allowed in Saudi Arabia as individuals attempt to fulfill their responsibilities to their families. Usually, nepotism is demonstrated during the recruitment of top-level managers, but with middle and lower-level employees, qualifications are quite relevant (Ardichvili et al., 2010). Studies carried out in Saudi Arabia indicate that most of the managerial problems emanate from personal loyalty and favoritism at work, rigid administrative policies, and systems, the primacy of individual over work relationships and unwillingness to take responsibility. There are also issues with subjectivity in promotion and appraisal, as well as dependence on the hereditary relations. The business ethics in Saudi Arabia is largely influenced by family orientation and tribal leadership, and it is less open to the Western values, norms, and attitudes regarding business culture. Basing on the Hofstede’s cultural dimension, Saudi Arabia is dominated by large power distance, strong uncertainty avoidance, masculinity orientation and high collectivism.
2.2. Business Ethics in the United States
Today, the concept of business ethics is not entirely confined to recognizing ethical issues, development of the codes of ethics and the implementation of the business ethics program to prevent misdemeanor. The business ethical conduct in the United States from Hofstede’s perspective is characterized by low uncertainty avoidance and high individualism (Kaminski, 2013). The ethical business culture is based on the alignment between official policies, arrangements, procedures, teaching and advancement programs and a stable ideal-based demeanor of the top management. The authentic behavior and individual ethical progress of leaders are regarded as a paramount attribute in the creation of a morally-sound culture of an organization. In the United States, more emphasis is put on the developing and enforcing the codes of ethics, as well as formal compliance programs. Usually, more attention is placed on ethic-based value statements and mission. Moreover, the corporate values are aligned with all other day-to-day operations and elements of culture within an organization.
The Federal Sentencing Guidelines for Organizations (FSGO) that was passed into law in the United States in 1991, oversees the quality of corporate ethics and compliance programs and imposes penalties in the event of violations. The ethical guidelines were developed by the United States Sentencing Commission, which recommends strict enforcement of the existing ethical regulations (Ardichvili et al., 2010). The ethical provisions cut across all organizations including global firms, which must promote ethical conduct in the workplace. The strict legislations put in place are informed by the increased corporate financial scandals, which have necessitated accountability and ethical conduct at the marketplace. Some of the legal provisions established regarding ethical misconduct include increased disclosure on all financial statements, civil and criminal penalties for non-compliance, as well as internal auditing performed by external auditors.
The United States is less tolerant to ethical misconduct including bribery and fraud. The traditional ethical foundations define the way in which business transactions are negotiated and completed. Usually, the business transaction revolves around the contract negotiated between two parties. Typically, the American Protestant culture and contemporary concepts of business ethics influence their conduct in a business environment.
The relationship between the Islamic religion and Saudi’s culture with business ethics
Saudi’s culture is characterized by the tribal system and the Islamic religion. Saudi Arabia holds a very vital status in the Islamic world because of the fact that it hosts two Holy Mosques. Islam is held in high regards and defines Saudi Arabian culture by determining the social traditions, demeanor, practices and obligation of the society (Fawzi & Almarshed, 2013). Tribal and kinship orders also determine an individual’s position in the society and influence their failure or success. Thus, the tribal system and Islamic religion significantly impact the workplace practices.
Islam develops the ethical behavior and principles in the society with the help of Sunna (the practices and sayings of the prophet Mohammed) and Koran (the holy book). The Quran presents an integrating force that represents a key driver to fashion a standard legal and cultural system, Sharia. The Muslim community is a brotherhood and calls for equality for all their wealth and health notwithstanding. Moreover, the value of family is held in high regards, and its importance is also emphasized in Quran and Sunna (Al-shawawreh, 2016). Usually, individuals are cultured to develop and maintain excellent relations with their relatives and extend help to them whenever needed than demonstrating generosity to others. With significant reliance on networking and connections, there is a sense of safety among individuals. As part of the strong values towards family and group collectiveness, people in the position of power are required to act in a ‘fatherly’ manner and offer jobs and rewards to their families and in-groups.
Saudi Arabia is marred with criticism regarding their business ethics because most of the managers provide privileges to unproductive individuals, which is unethical but commonplace. Influential people solve their dependents problems, for instance, by getting them jobs, connecting them with good business deals, as well as finding a place for the family members in good hospitals. Culture is one of the greatest influencer of business practices and in Saudi Arabia, the concept is clearly depicted in their approach to business.
IV Nepotism
Nepotism is one of the most global concerns that threaten the business industry and affects its existence because of the job discrimination practices. Nepotism is defined as “a favoritism shown to relatives or close friends by those in power (as by giving them jobs) (Aldraehim et al., 2012).” The world nepotism originated from “nepote” an Italian word that is an equivalent of ‘nephew’ in English It began in the 17th Century when most people in position promoted their nephews into powerful positions as they discriminated upon other qualified candidates. Ideally, nepotism is the way through which people get positions, jobs, and benefits that they do not really deserve. Usually, nepotism negatively affects the organization’s success because of the inadequacies of the people put in positions of power.
From a human resource management perspective, nepotism is the practice of demonstrating favoritism towards relatives or partners of the existing employees during the hiring process in an organization (Al-shawawreh, 2016). It is about the people in leadership positions hiring incompetent family members, providing undeserved rewards or discriminating against other candidates for their relatives. Historically, while some cultures such as the West regard nepotism as out-rightly unacceptable, others including Saudi Arabia, are more lenient towards it. Ideally, nepotism is a probable result of the current education system, cultural ideals, and economic structure.
4.1 Reported Cases of nepotism in Saudi Arabia with figures.
Nepotism is one of the elements that characterize the Saudi Arabian culture. The term Wasta is loosely used in Saudi Arabia to mean nepotism where one uses his or her connections to get through the bureaucratic red tape and get things done for instance scoring job opportunities (Fawzi & Almarshed, 2013). The staff recruitment process in Saudi Arabia collides with the prevailing culture, which encourages the use of nepotism or ‘wasta’ by most job seekers. The principal causes of nepotism in Saudi Arabia are:
Socio-cultural behaviors and structure
After oil was discovered in Saudi Arabia and increased collection of oil revenue, there was a sudden decline in business ethics, changes in social values and group alliances, as well as increased conflicting values. Networks were regarded more important, and a person’s welfare, and people became more dependent them than personal actions (Fawzi & Almarshed, 2013). With the infiltration of such norms and values in the Saudi Arabian culture, it encouraged nepotism since people were fulfilling their responsibility towards family members. People in positions of power were more open to bending the rules when it came to family.
Economic Organization:
The Saudi Arabian economic organization relies on limited industry and agriculture, which results in high unemployment opportunities and individuals significantly depend on nepotism to score jobs.
Educational Structure
The education system that was designed by colonialist did not provide any economic development, which resulted in a significant imbalance in the labor market, and people had to engage in vices such as nepotism to get a job opportunity.
Political Structure
In Saudi Arabia, the largest employer is the public sector, and there are just a few opportunities created by the private sector. The independent state’s leaders in Saudi have ensured that all the key public positions are occupied by their sons and educated tribal chief to maintain their loyalties.
Recently, there was a survey led by Nazaha, the National Anti-Corruption Commission, Nazaha, which depicted that nepotism as the highest form of corruption experience in Saudi Arabian public services sectors. A random sample of 1254 people, particularly of individuals who visit government bodies was used mainly from Makkah, Riyadh and the Eastern Province (Arab News, 2016). Most of the respondents suggested that the weak religious morals and factors are the leading contributors to the spread of administrative and financial corruption and nepotism. Other factors included the absence of transparency, old and complicated systems and weak control and laxity in the implementation of regulatory punishment.
More studies have reported nepotism cases, especially in public compared to the private sector. Evidence shows that favoritism or ‘wasta’ significantly contributes to the problems Saudi Arabians face. The employees appointed under the pressure of cronyism or nepotism enjoy higher salaries and less working hours. Ahmed Maghrabi, Taher Al-Dabbagh and Abdalla Hayajehn, noted that nepotism is quite substantial in the Arab World (Fawzi, & Almarshed, 2013). With increased cases of nepotism in Saudi Arabia, many of those who are qualified but deprived of job opportunities have had to migrate to other countries, which do not subscribe to nepotism and tribal loyalty at the workplace. Nepotism or ‘wasta’ remains a significant challenge in Saudi Arabia since it is based on cultural underpinnings, which make it harder to break the cycle.
Reported Cases of Nepotism in the US and Around the World
Nepotism in the Western societies raises legal issues. Studies show that about 40 percent of organizations in the United States prohibit practices inclined towards hiring one’s family members. The anti-nepotism rules establish in 1960’s and were meant to prevent the hiring of the male relatives of the male employees who were incompetent (Ardichvili et al., 2010). Debates on nepotism have always been about the possibility of a person hired through nepotism surviving the workplace environment. However, some cases of Nepotism have been reported in the U.S for instance, the political nepotism cases that the United States has had to grapple with including Clinton and Bush political dynasties. There are also issues of the family businesses, which have been very successful regardless of having the family members in the top management positions, for instance, the Trump Organization, which is owned by Donald Trump and his children work in the organization holding executive positions.
Nepotism is also part of the Indian business culture since the wealth is maintained within the family and the Indian elite consists of family members. It is unusual for the Indian businessmen to be generous to other individuals since they are expected to enrich their families first. Moreover, the Asian culture has it that when someone is considering succession of the business, they should look within the family member first before considering the general populace (Kaminski, 2013). In Japan, nepotism is commonplace although they do not encourage incompetence thus would not hesitate to fire any family member that is underperforming. Latin America also accepts nepotism and mostly do not understand the negative attitude that the United States harbors toward the practice. Italy regarded nepotism as illegal though there are so many businesses that are family-owned in Italy and practice nepotism. Most developing countries, just like Saudi Arabia have very significant cases reported of nepotism including Africa, Arab, and Asian countries. It explains why these nations are faced with instability in the marketplace and so many qualified people remain jobless.
Considering the findings of the study, it is clear that nepotism is not only practiced in developing nations but also in advanced nations. However, use of nepotism during the recruitment process is unethical, and the reported cases are significantly higher in the public sectors compared to the private ones. Arab countries consider nepotism as part of their national culture and despite all the negative repercussions it presents, it is still widely practiced.
Recommendation
The following recommendations can be made based on the findings primarily to the Saudi Arabian public area.
Saudi Arabia must adhere to religious teachings and practices that advocate for maintaining equality among people.
Ministry of information in collaboration with other sectors can hold informative conferences and call on people through television broadcast to shun away from unethical practices, which do not conform to religious underpinnings.
Saudi Arabia must outlaw nepotism and regard it as a criminal offense.
The Saudi Arabian marketplace should be inducted on the importance of hiring competent individuals.
The Saudi Arabian society including decision makers and intellects must reconsider some of the inherited cultural behaviors and values particularly those that are not in line with the Islamic teachings.
Conclusion
The business environment in Saudi Arabia has failed to develop sound business ethics with issues such as nepotism derailing any advancement. Tribal systems and culture define the business practices in Saudi Arabia. The business ethics is informed by the Sunna and Quran, which emphasizes the importance of family relation thus nepotism is inevitable in Saudi. However, the future of business ethics depicts that voluntary practices should be employed to ensure a strong ethical culture. The Saudi Arabian society must, therefore, be willing to adjust some of its cultural underpinnings to accommodate justice and fairness. As the utilitarian theory dictates, the ideal action is the one that produces the greatest good to the greatest populace. Nepotism is a far cry from utilitarianism because it represents selfishness, inequality and also depicts an unjust system. For Saudi Arabia to achieve the ultimate ‘greater good’ that utilitarianism represent, it will require significant readjustment of its ethical principles and reconstitute its political systems.

References
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