Essay: Legal Implications Of Ethical Decision Making In China And Brazil.

Commercial and Legal Arrangements

Discuss about the Ethical Decision Making and Cases.

Running a business is not an easy task due to the different factors which have an impact on the business. This is in terms of the factors over which the business has no control. These include the factors like regulatory compliance, social, political, financial, environmental and legal issues. The problems are increased when it comes to running a business in the international markets. This is because for carrying on a business in international market, the company has to follow the laws of not only the home nation, but of the target nations as well. The problem is amplified when the business has to be carried in different nations across the world. When such a situation is presented, the different issues raised in the global perspective have to undertaken (Hamilton & Webster, 2015).

In the following parts, a brief has been prepared for the Board of Directors of Australian organization management which would highlight the legal implications of dealing with parties of Brazil and China. In doing so a number of aspects would be analysed, which would include the legal arrangements which are needed for carrying on the business, cultural sensitivity, monetary system, in addition to the internal and external business environment and the ethical considerations in carrying on business in the two nations.

A key part of running business in the global market is to look after the commercial and the legal arrangements. The People’s Republic of China has a civil law system, which consists of administrative rules, regulations and statutes. Apart from this, the Supreme Court of China is responsible for issuing the interpretations which have to be adhered by the lower courts while adjudicating the cases. However, the lowers courts are not under the obligation of following the rulings of higher courts even though as a practice this is usually done. Unlike US, China does not have a federal system. Hence, there is no applicability of precedent in the nation. Two key forms of business vehicles can be used in the nation, which includes partnerships and companies (Ambler, Witzel, Xi & Zou, 2008). 

Like China, Brazil is a civil law nation. Though unlike China, the legal system of Brazil is based on codes and legislations which are enacted by the federal, the state and the municipal legislatures. In terms of the business management vehicles, the common form includes corporations, i.e., sociedade anônima, and limited liability companies, i.e., sociedade limitada (Bingemer & Thompson, 2017).

Regional Economic Integration

Regional Economic Integration denotes the efforts which are put in place for promoting fair and free trade based on the region. When it comes to China, the foreign companies are allowed to sell their goods and services in the nation in a direct manner. However, in doing so, there is a need to comply with the import regulations which are applicable. Trade can also be conducted in the nation by forming branches and subsidiaries, appointment of distributor or/and agency, and entering in franchisee agreements with the qualified partners (Lewis, 2016).

In case of Brazil, the majority of overseas companies can conduct their business in t eh nation through affiliates and subsidiaries. Where a decision is taken by a foreign company to form a branch in the nation, the branch would be subjected to and governed under the laws of the nation. The formation of such a branch would also require the authorization, which is granted through the ministerial ordinance, and this is a lengthy bureaucratic process (Bingemer & Thompson, 2017).

In China, there are a number of regulations surrounding the exchange control and currency. A foreign investor in Chian in a foreign investment enterprise, where 25% of the registered capital includes foreign investment accounts, has the legal entitlement of converting the after tax dividends which are derived from these enterprises to foreign currency and these can be remitted overseas based on the applicable regulations (Lewis, 2016).

In Brazil, the obligations have to be executed in the national currency, i.e., in reais. If the same is not done, Decree-Law No 857/1969 would make it null and void. When it comes to the obligations which take place between natural person or entities domiciled in Brazil and natural persons or entities domiciled abroad, the same has to be paid, based on Law No 9,069/1995, in an exclusive manner through institutions which are authorized to operate in foreign exchange market. This authorization is granted by the Central Bank, which effectively controls the foreign exchange market. Though, at some instances, there is a need to obtain approval from the Securities and Exchange Commission. The transfer of funds from or to a place outside Brazil is, save for some exceptions, not subjected to limitations regarding the amount and the prior authorization from the pertinent authorities of the nation (Bingemer & Thompson, 2017).

At present, the people from out of China are required to operate and invest in China through the special investment vehicles present under the different acts and are also subjected to the diversified rules from the domestic Chinese companies. January 19^th, 2015 came with the circulation of draft version by the Ministry of Commerce of the new Foreign Investment law. The public comment period expired back in February 2015. Once formally accepted, the present regulations and laws surrounding governing foreign invested entities would be replaced and repealed. This would result in all of the foreign investment entities converting into corporate entities or limited liability companies based on the company law. Though, before the same is brought into action, there are several steps needed which includes multiple rounds of reviews (Lewis, 2016).

Current Trends and Developments

In Brazil, the Congress is under continued discussing on a new Commercial Code which would cover the provisions on legal entities and this proposal is deemed as a very controversial one. There is a consideration going on in the Federal Government for removing or lifting the barriers towards the acquisition of the rural land by the overseas nationals, and in the acquisition in Brazilian commercial airline companies, of equity interest by the overseas nationals, which is an increase from the present 20% limitation (Bingemer & Thompson, 2017).

Cultural sensitivity refers to the awareness of the similarities and differences in culture, which exists between the people from different areas, based on their values of right and wrong, positive and negative, and better and worse. Between China and Brazil, there are both

The people of both the nations are not uncomfortable in getting straight to the point in the matter of finalizing the deal. There is a common preference towards socializing and getting to know the party with which the business is being carried on. In order to build a good rapport, considerable time has to be spent and a relaxed and pleasant relationship has to be formed before business is discussed. Both nations appreciate authority and hierarchy levels. The approach of business people of these nations is negotiating with the people instead of the company and for this purpose; and instead of opting for telephonic communications or written communications the face to face meetings are preferred (Véras & Véras, 2011).  

Apart from the cultural similarities between the two nations, there are quite of lot of differentiating factors too. China considers the exchange of business cards as a ceremonious matter; whilst Brazil deems it as just a manner of exchanging information. Interruption while speaking is not tolerated in Chinese culture, whilst the same is still acceptable in Brazil. A direct eye contact is deemed as disrespectful for Chinese people, whilst Brazilians deem it as a sign of honesty. Brazilians also accept backslapping and hugging, whilst in Chinese people, this is not acceptable in any situation (Véras & Véras, 2011).

The best manner of highlighting the internal environment of any nation, a SWOT analysis proves the best option. A SWOT analysis denotes the strengths, weaknesses, opportunities and threat before a nation, on the basis of different factors.

Brazil is a leading global services destination owing to it being a substitute location for business management.

1. SWOT of Brazil is presented below:

2. SWOT of China is presented below:

Cultural Sensitivity

The external environment of any nation can be best summed up through a PESTLE analysis where different factors affecting the businesses in the nation are highlighted.

A strong political system in the nation helps in boosting the economy. Government is strong and has firm commitment towards flourishing of business. There is a strong political support to the industrial sector which helps in boosting the economies.

Chian continues to have high GDP and excellent growth rate. There are favourable rates of saving, expensive export business, and large number of skilled workers. The interest rates are increasing and commercial banks reserves are also high which do prove to be unfavourable.

There is fluctuation in age distribution and cultural and social aspects play a major role in the nation. The social behaviour and family size have an impact over emigration, education, religion and lifestyle.

The nation is amongst the world leaders in technology where new mechanisms of distribution, production technology and new methods of working are constantly brought forward.

Due to the growth in e-commerce, regulations have been formed with regards to their protection, and taxation. Though, there are no regulations to support privacy or recognition of digital structures.

The nation is famous for its environmental related issues due to high pollution in the nation, coupled with regular smog incidents. Though, steps are taken to curb this in line of reducing vehicles (Kasi, 2015).

The nation became democracy in 1980’s. A huge problem in the nation is corruption which continues to go worse. This goes to such an extent that even when a small business has to be opened up in the nation, the same cannot be done till the time payments are made to the officials of government. Owing to the dissatisfaction amongst the people, mass protests were carried out in 2016 against Dilma Rouseff, which shows that before investing in business operations in the nation, there is a need to consider the political situation of the nation.

Back in 2010, the GDP of the nation was quite high but the same went down in 2012 and 2014. The nation is still struggling in pulling itself out of recession even though the signs of recovery are visible.

There is a decline in the gap between rich and poor with middle class growing. Though, around 20% people still live below the poverty line.

In comparison to nations like US and China, Brazil has weaker technological infrastructure. Though, the IT sector of the nation is constantly improving.

There are varied legislations across the states which results in high compliance costs owing to complexities. A normal business establishing period takes 120 days.

Steps have been taken by the government to stop emissions and deforestation and industries are forced to start eco-friendly combustion techniques (Research Ideas, 2017).

Apart from the legal aspects, there is a need to consider the ethical principles for gaining an understanding of social justice and human rights with regards to business practice. Thus, in carrying on business in the nation, there is a need to apply the theories of corporate social responsibility, utilitarianism, virtue ethics, deontology and Kantian view.

Corporate social responsibility relates to the obligation of the companies to analyse their impact of their actions and decision on stakeholders of the company and also about regulating and controlling the same (Dima, 2016). Utilitarianism is a leading ethical theory which makes such acts as ethically correct, through which the utility of an action is maximized (Albee, 2014). When poor work conditions are provided in factories of China, it would not be an ethical thing, in addition to breaching the basic human rights. The next applicable theory is virtue ethics based on which, the acts are to be undertaken in manner of honesty, justice and integrity (Hooft, 2014). When the tourist in the nation is robbed, as was done during Rio Olympics, the ethics are not followed. This is in addition to disgrace of fundamental rights of human safety. Deontological theory provides that there is a need to comply with the duties and obligation for making a decision (Ferrell & Fraedrich, 2015). For this, there is a need to follow the environmental concerns to fulfil its obligation towards environment. Lastly, Kantian view requires the treatment of people as end, instead of them being treated like a means to end (Beiser, 2014). The corruption problem of Brazil shows the citizens being treated as a means to an end, instead of working towards their betterment. Thus, these ethical theories have to be applied for running business in the two nations, particularly in context of social justice and human rights which are related to the practices of business.

Conclusion

On the basis of this analysis, it thus becomes clear that running a business in China and Brazil is not an easy task to do. There are a number of factors which have to be taken into consideration before a business is started in any of these two nations. There is a need to consider the different legal formalities and ethical requirements based on the internal and external environment faced by the nation. There is a need to strictly follow the law, which is an obligation, and to tap the opportunities presented above of the two nations. Most importantly, there is a need to put the human rights of the individuals in priority zone, even where these are not a legal obligation. Thus, this discussion achieved the purpose of highlighting the legal implications of conducting business in both the nations.

References

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