Governance and Corruption Constraints: The Business Ethics Glass Ceiling in Middle East Corporate Governance

This paper argues for a model of a corruption constraint on organizational growth and development in the form of a business ethics glass ceiling. Although the problem of corruption‘s negative impact on economic growth is well documented, this paper‘s contribution is to propose a cohesive model to show how corruption combines with other influences such as weak corporate governance to act as a serious constraint on the business growth of local firms. This previously unidentified barrier to business success is marked by corruption and the model particularly applies to small and medium-sized and family businesses in the Middle East and North Africa (MENA). These businesses are vital to the economic growth and political stability of that region, but corruption makes it difficult for them to grow, overcome a financing gap, and become stronger organizations. Corruption also drains firm resources and warps normal incentives like transparency and accountability that encourage expansion because firms may choose to appear unprofitable to avoid corruption. As a result, the growth of these businesses is limited when they remain poorly run and small in size as they attempt to avoid an onslaught of corruption. This short-term coping strategy fosters the glass ceiling constraint that is the subject of this paper. The business ethics glass ceiling is formed by several factors. These influences are weak corporate governance, social and cultural aspects, and political and economic pressures. This paper focuses on the role of corporate governance and first describes the constraints and the place of these businesses in MENA, before using the regional example of Lebanon to demonstrate the stunting nature of the corruption-influenced ceiling and its role in producing a financing gap. Finally, the paper presents recommendations for breaking through the glass ceiling and provides suggestions for additional research on the intersection of corruption and ethics constraints in emerging markets.http://deepblue.lib.umich.edu/bitstream/2027.42/69255/1/1143_NBishara.pd

The Law and Ethics of Restrictions on an Employee’S Post-Employment Mobility

Employee mobility as a conduit for knowledge transfer to a business competitor is a growing source of concern for many employers in the modern business environment where the skills, relationships, and knowledge embedded in a firm’s employees has become an important source of competitive advantage. Employers may seek to restrict the post-employment mobility of their employees to address this concern through the use of various legal mechanisms. Accordingly, policymakers are increasingly asked by employers and employees to address these concerns by adjudicating disputes in the courts and in legislatures, despite not having a full ethical grounding for these policy decisions. We first analyze the incentives and preferences of employers and employees related to employee mobility and then examine three legal mechanisms used to address employee mobility: covenants not to compete, the inevitable disclosure doctrine, and garden leave. We then review the business ethics implications of each mechanism and make recommendations for the policy makers based on property rights, utilitarian, and fairness perspectives.http://deepblue.lib.umich.edu/bitstream/2027.42/90028/1/1172_Bishara.pd

Complementary Alternative Benefits to Promote Peace

Recent research has focused on business as a mediating institution that can influence society while engaging in the traditional profit-making and value generation functions. This work includes Professors Fort’s and Schipani’s arguments about how business may be able to play a role in promoting more peaceful societies, and the work of other scholars addressing how businesses might serve a role in reducing violence in society and the workplace. Although there is a significant body of scholarship on the role of business in reducing violence in society, there is little research on concrete steps for businesses to take to achieve this goal. This paper attempts to begin to fill that void. As identified by Fort and Schipani, business may promote more peaceful societies by encouraging a sense of community and by engaging in track two diplomacy. We argue that one way in which to encourage a sense of community and engage in track two diplomacy on a small scale, and therefore potentially play a role in reducing violence, is for business to provide what we denote as complementary alternative benefits (CABs), to its workforce. In this paper, we encourage businesses to offer CABs which focus on sustaining the health, reducing the stress, and improving the camaraderie of its workforce. We argue that business can use these benefits to promote a healthy, less-stressed, and collegial workforce that is less prone to resolve conflicts by violence. Further, we examine the role business plays in promoting more peaceful societies and how employer-initiated stress reduction programs are consistent with both business ethics and peace-building principles. We suggest that the employment benefits firms provide to their workforces may have a significant impact on how those employees interact with society. Finally, we demonstrate how CABs may also reduce costs related to absenteeism and turnover and thus improve the bottom line.http://deepblue.lib.umich.edu/bitstream/2027.42/61344/1/1119_CSchipani.pd

Using the Resource-Based Theory to Determine Covenant Not to Compete Legitimacy

This paper addresses the legitimacy of competing interests involved in the enforcement of covenants not to compete (“noncompetes”). To date, the courts and legislatures have not relied on a principled theoretical framework to identify and assess the competing interests between firms and individuals in this setting. This paper fills the research void by providing a theoretical framework that identifies the legitimacy of these competing claims. The framework integrates managerial research involving the resource-based theory of the firm and the knowledge-based perspective of competitive advantage with the legal analysis and enforcement of noncompete terms. A descriptive framework of the parties’ competing interests provides four discrete scenarios, which formalizes the types of legitimate interests a court must balance when asked to enforce noncompetes. From this descriptive account, a prescriptive analysis is advocated that uses an ownership approach to assess the legitimacy of an employer’s claim to knowledge covered by a noncompete.http://deepblue.lib.umich.edu/bitstream/2027.42/85367/1/1157_Bishara.pdfhttp://deepblue.lib.umich.edu/bitstream/2027.42/85367/4/1157_Bishara_Apr12.pd

Covenants Not To Compete in a Knowledge Economy: Balancing Innovation from Employee Mobility Against Legal Protection for Human Capital Investment

This Article examines a specific policy issue that goes to the heart of the larger debate surrounding the changing employment relationship: How should the law of covenants not to compete adapt to the changing landscape of the U.S. labor market and to the increasing importance of a knowledge-based economy? The author first argues that noncompete policy is of great importance to fostering economic growth and labor markets, and then discusses various theoretical approaches to noncompete enforcement in a knowledge economy. The preferred approach, the author contends, is a hybrid model of selective enforcement that differentiates among workers as “creative” or “service” employees, thereby enhancing the positive spillovers gained from policies at the extremes of the enforcement spectrum.http://deepblue.lib.umich.edu/bitstream/2027.42/97553/1/2013May14NBishara.pd

Human Rights and a Corporation's Duty to Combat Corruption

Increasingly, there is awareness that corruption and human rights are intimately connected. However, the debates and reform proposals on improving corporations’ social performance in these two areas are often treated as separate concerns. This article argues that companies must see combating corruption and promoting human rights as connected and complementary moral duties in the countries where they operate. MNCs know (or should know) that corruption greatly impacts their ability to respect human rights. Thus, awareness of how corruption impacts human rights throughout the MNC’s supply chain should be essential for conducting “human rights due diligence.” To accomplish this goal, MNCs should not only ensure that their employees and agents do not pay bribes, but that corruption is not standing in the way of their suppliers’ ability to meet human rights obligations. In addition, this may also include an obligation to work towards reducing the enabling environment that allows corruption to thrive in that location. This duty goes beyond legal compliance with the FCPA or other national anti-bribery laws and must be central to the discussion of corporations’ human rights obligations.http://deepblue.lib.umich.edu/bitstream/2027.42/106394/1/1226_Bishara.pd

A Corporate Governance Perspective on the Franchisor- Franchisee Relationship

The franchisor-franchisee relationship is unique in that it has characteristics of both an arm’s length business transaction as well as an ongoing business relationship. As time goes by, however, the interests of the parties may diverge. It is in the franchisees’ interest to make their individual units as profitable as possible while, conversely, franchisors also profit from the licensing of the trademark and the collection of royalties from all their franchisees. For example, an increase in the number of stores in a given market will likely benefit the franchisor, whereas the same expansion may dilute the profitability of a particular franchisee through encroachment. The parties’ interests, thus, become misaligned. We argue that that, in addition to increased disclosure under Federal Trade Commission (FTC) rules, the misalignments in the franchisor-franchisee relationship can be addressed by taking a more self-regulatory approach that recasts the duties owed among the parties. The FTC regulations focus on greater disclosure and as government regulations the rules are aimed at external incentives and protecting of the party that is perceived as having less leverage and (i.e., the franchisee). We argue for a more fiduciary duty-like relationship for franchisor-franchisee relationship and look at two somewhat related ways that the relationship is “self-regulated” by the market and, thus, the parties. We first examine the time-tested mechanism of fiduciary duties imposed by the courts as an additional balancing mechanism to supplement the mere disclosure under the FTC. Second, we examine the equitable standards applied to restrictive covenants, such as non-compete agreements and non-disclosure (confidentiality) agreements as a further reference point for how the common law can provide guidance on the boundaries of the franchisor-franchisee relationship. We conclude that this mix of court intervention to impose fiduciary duties and the existing FTC regulation is sensible because the parties are in a relatively long-term, well-defined relationship in which the initial disclosure under the FTC rules is insufficient.http://deepblue.lib.umich.edu/bitstream/2027.42/107980/1/1245_Bishara.pd

The Behavioral Effects of (Unenforceable) Contracts

Do contracts influence behavior independent of the law governing their enforceability? We explore this question in the context of employment noncompetes using nationally representative data for 11,500 labor force participants. We show that noncompetes are associated with reductions in employee mobility and changes in the direction of that mobility (i.e., toward noncompetitors) in both states that do and do not enforce noncompetes. Decomposing mobility into job offer generation and acceptance, we detect no evidence of differences in job search, recruitment, or offer activity associated with noncompetes. Rather, we find that employees with noncompetes—even in states that do not enforce them—frequently point to their noncompete as an important reason for declining offers from competitors. Our data further show that these employees’ beliefs about the likelihood of a lawsuit or legal enforcement are important predictors of their citing a noncompete as a factor in their decision to decline competitor offers

Using the Resource-Based Theory to Determine Covenant Not to Compete Legitimacy

This Article addresses the legitimacy of competing interests involved in the enforcement of covenants not to compete (“noncompetes”). To date, the courts and legislatures have not relied on a principled theoretical framework to identify and assess the competing interests between firms and individuals in this setting. This Article fills the research void by providing a theoretical framework that identifies the legitimacy of these competing claims. The framework integrates managerial research involving the resource-based theory of the firm and the knowledge-based perspective of competitive advantage with the legal analysis and enforcement of noncompete terms. A descriptive framework of the parties’ competing interests provides four discrete scenarios, which formalizes the types of legitimate interests a court must balance when asked to enforce noncompetes. From this descriptive account, a prescriptive analysis is advocated that uses an ownership approach to assess the legitimacy of an employer’s claim to knowledge covered by a noncompete