This paper analyzes the ethical dilemma faced by Pegasus International Inc., a company weighing a $100 million annual opportunity in China against the expectation of paying bribes to local decision-makers. Drawing on ethical decision-making frameworks, the Foreign Corrupt Practices Act (FCPA), and the concept of cultural relativism, the paper argues that Pegasus should refuse bribery while still pursuing Chinese market entry through legitimate means. The paper also adopts a first-person managerial perspective, exploring how a manager directed to "make Chinese decision-makers happy" might weigh risks, time constraints, and creative alternatives before making a final recommendation to the CEO.
Pegasus International Inc. faces a moral dilemma concerning whether it should expand into a new country — China — where bribery and illicit payments in business have been normalized. Despite this bribe-taking culture, a growing company in China is estimated to generate $100 million annually, representing a tremendous opportunity for Pegasus (Hackworth & Thomas Shanks, 2021). At the same time, although Pegasus's Chief Executive Officer (CEO) wants the company to survive and maximize shareholder value, he also wishes to maintain ethical leadership. The CEO's ideal corporate culture is characterized by honesty, respect for all, integrity, and teamwork.
The company should not pay bribes to enter the new market. However, this should not prevent Pegasus from pursuing expansion into China altogether. To resolve this moral dilemma, the company should follow a decision-making framework that considers ethical issues, available alternatives, and the stakeholders involved. The nature of a company's operations may evolve as it enters a new environment, but its business ethics should remain constant. Pegasus's ethical behavior is guided by intellectual honesty and integrity; thus, it should remain honest with itself and with others (Hackworth & Thomas Shanks, 2021).
Bribery is morally wrong and therefore should not be an option for the company. The CEO should explore every possible avenue to establish the new branch in China without engaging in unethical acts. Any decision made in this situation will have enormous influence — not only on Pegasus but also on the stakeholders in China.
Cultural relativism involves refraining from judging another culture by one's own standards or values. It discourages people from perceiving another culture as right or wrong simply because it aligns or conflicts with their own (Global Business Ethics, n.d.). Instead, individuals are encouraged to understand cultural values and practices within the context of that culture. For example, bribery is considered normal within the Chinese business community, but it directly contradicts Pegasus's ethics and moral values (Hackworth & Thomas Shanks, 2021).
Pegasus's refusal to pay bribes has less to do with cultural relativism and more to do with avoiding the legal and financial risks associated with bribery, as outlined in the Foreign Corrupt Practices Act (FCPA) (Jones Day Publications, 2010). If the company were to pay bribes, it would be accepting a moral wrong, which leads to ethical indifference. Cultural relativism, in this context, threatens the morality and discipline of ethics — particularly for the company's CEO. Joining bribery-based practices would promote cultural relativism by appeasing Chinese decision-makers at the cost of compromising Pegasus's core values.
"First-person managerial analysis of risks and alternatives"
The final decision should be determined by carefully weighing the possible risks and benefits of paying bribes. A decision made in this case will have enormous influence not only on Pegasus but also on its stakeholders in China. Regardless of cultural norms, Pegasus's commitment to integrity, as reinforced by frameworks like the ethics of bribery and the FCPA, should guide the company toward a course of action that does not compromise its values or expose it to significant legal liability.
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