Bureaucratic corruption and profit tax evasion

Firms may evade taxes on profits and can also avoid fulfilling legal restrictions on production activities by bribing bureaucrats. It is shown that the existence of tax evasion does not affect corruption activities at the firm level, while the budgetary repercussions of tax evasion induce less corruption. Policy measures which alter the gains or losses from corruption have a non-systematic impact on tax evasion behaviour.      

Managers and their not-so rational decisions

Today's corporate environment requires managers to be excellent decision makers. Their ability to make fast, widely-supported, and effective decisions will, in large part, shape the performance of their firms. In this article, we describe two cognitive systems that influence decision making. System 1 refers to a process that is fast, effortless, and intuitive. System 2 is a slow, controlled, and rule-governed decision-making process. Both are important to a wide variety of managerial decisions, and they interact with each other. There are, however, a number of forces at work that hinder the effectiveness of these processes. For example, we know from prospect theory that managers are unwilling to incur loss, so much so that they often make irrational decisions based on a small probability that they could avoid such loss. Another example, the escalation of commitment, explains why managers may continue to dedicate resources to failed projects. We describe these and other biases, with a view toward helping managers better understand the problems of decision making and improve the effectiveness of their decisions.     

Transatlantic business ethics

The Business Ethics Center of the Budapest University of Economic Sciences organized a Transatlantic Business Ethics Summit on September 15–17, 2000 in Budapest, Hungary. The Summit was sponsored by the Community of European Management Schools (CEMS) and Procter & Gamble.
The main function of the Summit was to provide a forum for leading American and European scholars to explore the background theories and value bases of business ethics from the perspective of the 21st century. The participants reflected on the state of the art of business ethics as it has been practised in the USA and Europe; however, the future of business ethics as a discipline was the main focus of the Summit. Since business ethics is closely related to business and capitalism, some considerations of the 21st century economic, political, and social reality were presented too. The paper is based on and composed from the abstracts provided by the participants of the Transatlantic Business Ethics Summit. The abstract booklet can be obtained from Laszlo Zsolnai, the Convenor of the Summit.     

Incremental Organizational Change in a Transforming Society: Managing Turbulence in Hungary in the 1990s

The rapid liberalization of the former state socialist economies of Eastern Europe coupled with privatization were thought by many in the early 1990s likely to generate effective capitalist firms quite quickly. However, the radical institutional transformation and collapse of Soviet markets resulted in considerable uncertainty for most companies which, together with high sunk costs and lack of resources, inhibited organizational restructuring and strategic change. Despite high levels of foreign ownership and control by the mid-1990s, many Hungarian companies continued to produce much the same kinds of products for mostly the same customers with inputs from mostly the same suppliers as in 1990. While most had reduced employment substantially, and many had disposed of ancillary organizational units, the bulk of the companies considered here had not greatly altered their work systems and overall organizational structures. In the few enterprises where the production process had been extensively reorganized by 1996, this was funded and directed by foreign firms who had taken them over. These foreign firm-controlled companies also tended to have new top managers from outside the enterprise. They additionally introduced new products more often than Hungarian firms, albeit within rather narrow product lines that usually dominated the domestic market. Overall, most of the enterprises studied were still doing much the same set of activities in the mid-1990s, though with fewer staff, as at the start of the decade, and privatization per se had not led to major shifts in enterprise structure and strategy, nor did it seem likely to do so in the foreseeable future.