firm’s unethical behavior in indonesia: a...

Ekuitas: Jurnal Ekonomi dan Keuangan ISSN 1411-0393Akreditasi No. 110/DIKTI/Kep/2009

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FIRM’S UNETHICAL BEHAVIOR IN INDONESIA: A PRELIMINARY STUDYUSING NEGATIVE CASE ANALYSIS

Kresno Agus [email protected]

Balai Penelitian Teknologi Hasil Hutan Bukan Kayu Mataram, NTBIva Ariani

Fakultas Filsafat, Universitas Gadjah Mada, Jogjakarta

ABSTRAK

Di Indonesia saat ini, media, baik cetak dan elektronik memberi perhatian pada tanggung jawab socialperusahaan dan tata kelola perusahaan yang lebih dari sebelumnya. Meskipun demikian, realitas bisnis sangatberbeda dari citra yang disampaikan di media. Penelitian ini bertujuan untuk mengidentifikasi perilaku tidaketis perusahaan-perusahaan di Indonesia yang diberitakan di media dan mengklasifikasikannya agar dapatdiukur secara kualitatif. Berita tentang tanggung jawab social perusahaan dari Januari 2005 hingga Desember2007 dikumpulkan dan dianalisis dengan analisis isi kualitatif menggunakan analisis kasus negatif. Analisiskasus negatif adalah suatu analisis yang melihat sesuatu dari kebalikannya. Analisis kasus negatif digunakankarena adanya relativisme etis (keyakinan etis yang berbeda antara masyarakat satu dengan masyarakat lainnya,bahkan antara orang satu dengan orang lain). Hasil analisis menunjukkan bahwa ada beberapa perilaku tidaketis dari perusahaan-perusahaan. Perilaku tidak etis ini dapat diklasifikasikan kedalam perilaku tidak etis kepadaperusahaan itu sendiri (internal), dan perilaku tidak etis kepada negara dan masyarakat umum (eksternal).

Kata kunci: perilaku tidak etis perusahaan, media, teori agenda setting, teori stakeholder, analisis isi,dan analisis kasus negatif.

ABSTRACT

In Indonesia now, media, both printed and television pays attention to Corporate Social Responsibility(CSR) and Good Corporate Governance (GCG) more than even before. However, the reality ofbusiness life is quite different from the image presented in the media. This study tries to describeunethical behaviour of firms in Indonesia that documented in printed media and classify them to bemeasured qualitatively. News of CSR issued from January 2005 to December 2007 was gathered andanalyzed using qualitative content analysis method with negative or deviant case analysis. Negativecase analysis is an analysis to see something of the opposite. It used because of ethical relativism(ethical beliefs differ from one society to another society, even among people with one another). Theresults show that there are some unethical behaviors of firms. These unethical behaviors can beclassified into unethical behavior directed internally to firm and those directed externally toGovernments and society at large.

Keywords: firm’s unethical behavior, media, agenda setting theory, stakeholder theory, contentanalysis, and negative case analysis.

INTRODUCTIONIn a classic study of the ethics of busi-

ness managers, Raymond Baumhart inVelasquez (2011) asks more than 100business people about the meaning of ethic.The question is: “what is the meaning ofethic to you?” The answers were thenclassified.

The results are: 50% defined ethic as “whatis said by my feeling to myself that some-thing is right”; 25% defined it in relation toreligious aspect as“ something in line withmy religious beliefs”; and 18% defined as“something in line with the golden rules.”

Firm’s Unethical Behavior In Indonesia….. --Hendarto 279

In our opinion, feeling has not been anadequate basis to make any decision. Equallyare religiosity and golden rules.

To make it clear, the following is theillustration as told in Makarim (2011), about aperson with good intention, good motivation,high integrity, but was punished by theMichigan court.

“Jack Kervorkian is a pathologist, visualartist, Jazz composer, instrumentalist, andeuthanasia activist. Euthanasia is related toone’s right to stop his/her own life because ofold age, long-lasting painful disease, andabsence of possible medication. He hadperformed euthanasia for 130 patients withfatal-diseases at their own request. Heconsidered unfair to see the state holds theright to perform death sentence (for serialmurderer, for example) but do not extendthe right to the owner of life. Therefore, until1999, he had helped some patients with fataldiseases to end their life at their ownrequest. Some people agreed but some othersdisagreed with what he had done. One of thereasons of disagreement was that Kervorkianhad taken the role of God. After undergoingsome sessions of court, the court ofMichigan in 1999 punished him 25 years onaccusation that he had violated the Regu-lation that prohibited euthanasia.”

From what is explained it is clear thatwhat is meant by ethic by some people willbe different from what other people mean.An action is considered unethical by a num-ber of people, but on the other hand, it isethical. Therefore, the objectives of this studyare: (1) identifying unethical behavior offirms in Indonesia; and (2) classifying une-thical behavior of firms to be measured quali-tatively. To answer the questions the study,we use deviant-case analysis taken from thenews in mass media. What we mean bydeviant-case analysis is that we collect thenews on ethical behavior (publishing offirms’ CSR activity) and analyze them rever-sely.

AGENDA SETTING AND STAKEHOLDERTHEORY

Cooke (1991) mentions that it is difficultat present time to find any magazine ornewspaper without reference of ethics.Szwajkowski (1992) informs that organizati-onal misconduct or organizational crimes(white collar, corporate and occupationalcrime, unethical behavior, role violations) areincreasing social issues. Crittenden (2009)adds that the report on the scandals made byfirms has dominated the popular mass mediain the past years, and the scandals thatinvolve government employees have enda-ngered the economic stability in some parts ofthe world. Even in more explicit language,Fassin (2005) informs that actually nearly allcountries in the world have the cases ofEnron, Parmalat, Ahold, Vivendi, Lernoutand Hauspie or MCI-Worldcom. He alsomentions that unethical behavior of entre-preneurs, unfair managers, and corruptivebusinesses have damaged the good repu-tation of entrepreneurs as a whole. Thiscondition has led to the making of suchconcepts as CSR, triple bottom line, accounta-bility, sustainable development, Millen- niumDevelopment Goals, Good Corporate Gover-nance and still many others.

Agenda setting theory was initially intro-duced by Walter Lippman in 1965. Empiricalstudy about this theory was performed byMcComb and Shaw (Rakhmat, 2007).McComb and Shaw (1972) examine the agen-da setting theory in presidential campaign in1968 and make hypothesis that mass mediadetermined the agenda for each politicalcampaign, that affect the projected attitude topolitical issues. Severin & Tankard Jr (2001)inform that agenda setting theory refers tomedia ability, with repeated news coverage,to raise the importance of an issue in pubicmind. Assumption in agenda setting theory isthat mass media filter news, articles, orwritings to be published. Selectively, the“gatekeepers” such as proofreaders, editors,and even journalists to determine whichnews deserve to be published, and whichothers have to be declined. Because the

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readers, audience, and listeners get infor-mation mostly from mass media, the agendaof media is certainly related with the agendaof society. McQuail (2010) states that: First,mass media can serve as a mirror of publiclife. Second, mass media can also be viewed asa social agent or power. As a mirror, massmedia is assumed to be an institution thatprocess social facts in the society. In thiscontext, the mass media creates agenda ofsocial facts. In other words, what is releasedby the mass media is important socialdocument that portrays the real condition ofthe society. On the contrary, when the eventsare concealed, the events are consideredunimportant. Meanwhile as an agent, themass media is assumed to be a social insti-tution taking part in the creation of publicopinion and public attitude on particularissues or events. The mass media can createthe agenda of mind and perception deter-minant on particular issues and events. Whatis not released by the mass media is consi-dered unimportant for the society.

Stakeholder theory has burgeoned inrecent years (Friedman and Miles, 2002).Donaldson and Preston (1995) note more than100 articles primarily concerned with thistheory between 1984 and 1995, Gibson (2000)finds 200 articles in the 1990s alone. Mitchell,Agle, and Wood (1997) examine 27 defini-tions of stakeholder. They find that stake-holders are groups that have “stake” or aninterest in the firm, that is bear a risk; groupsthat have a claim, contract, ownership orright; or groups that have a relationship withthe firm, affect or are affected by, influence orare influenced by the firm. Nevertheless, Kolkand Pinske (2006) inform that the classicdefinition of stakeholder suggested byFreeman mostly referred in the literature.Freeman (1984) defines the stakeholder, asany group and individual influenced by theachievement of organizational objectives thatin turn will influence the achievement of theobjectives. Bertens (2000) notes that thesuccessful use of the term stakeholder ispartially caused by the fact that English isrhetoric in nature. This term is identical to the

term stockholders, although it is actually animplicit criticism to the tendency of overappreciation to the importance of stock-holders or owner of the firm. All stakeholdersdeserve adequate attention from the firm.Unless it is adequately attended, there will bea feeling of dislike to the firm. They may jointo stop or disrupt corporate operation. Howe-ver, on the other hand, stakeholder can helpand support corporate operation (Frederick,Devis, and Post, 1992). Therefore, in additionto other parties, stockholders are a part ofstakeholder. Etes (2005) mentions, in additionto stockholders, there are some investors. Theinvestors include the employees, customers,suppliers, communities, nation, and thepublic that support the existence of firm. Theinvestors are called stakeholder, and firm hasa credit in accounting sense because thestakeholders have invested large amount ofresources, which include not only money butalso job, career, and sometimes their life tothe firm.

Clarkson (1995) classifies stakeholder into2 main groups: primary and secondary stake-holders. Primary stakeholder, participantstakeholder, is a person (a group of people)without their participation of which the firmcannot keep the existence (going concern).Secondary stakeholder, non-participant stake-holder, is a person (a group of people) thatinfluence and get influenced by the firm.Keraf (2000) mentions that secondary stake-holder can be very important, even moreimportant than primary stakeholder.

Moreover, Frederick et al., (1992) statethat market and non-market are the basicclassification on primary and secondary stakeholders. Meanwhile, Neville and Manguc(2006) discuss how members of differentstakeholder can work in collaboration toachieve the collective objective or may bedifferent in perspective, diametrically oppo-sed, towards a particular issue that influencethe firm.

Figure 1 shows that initially the stake-holder concept included such basic elementsas customers, employees, civil society, sup-pliers, stockholders, Government, and compe


titors. Freeman (2004) represents the stake-holder model in the form of map. When weobserve, the map will resemble a wheel theaxis of which is firm, and the rim consists ofother elements. Each element is connected tothe axis by dual-edge arrows representing areciprocal relationship.

Although many researchers have classi-fied stakeholder into small units, identifyingthe stakeholders is still difficult and ambi-guous. A person living near the firm andworks as a government employee is an exa-mple of the difficulty in classification. It is notclear also if competitors are stakeholders.Which competitors? How can competitorsclassified into primary stakeholder? Doeseach firm’s strategy have impact on compe

titors? These are some weaknesses of stake-holder theory. To deal with such problem,Freeman in Fassin (2009) makes some adap-tation to the stakeholder concept.

Figure 2 shows that competitors can beexcluded from primary stakeholder category.Freeman made a square contains only prima-ry stakeholder, which is the direct factor ofinput-output of a firm. Freeman also putpressure group in the concept of stakeholder.This pressure group consists of NGOs, envi-ronmental observers, the government, media,critics, and others. Although Freeman hasadapted his concept of stakeholder, there isstill a dispute about how stakeholder influen-ces firms’ decision and behaviour. To over-come the problem, Fassin (2009) proposes a

Source: Freeman (1984).Figure 1

The Original Stakeholder Model

Source: Freeman in Fassin (2009).Figure 2

The Adapted Version of the Stakeholder Model


Source: Fassin (2009).

Figure 3The Triangular Relation between Stakeholder, Stakewatcher and Stakekeeper

stake model of three kinds: real stakeholder,stakewatcher, and stakekeeper. The 3 cata-gories have substantially different profiles.For real stakeholder power and influence arereciprocal; the firm has responsibility forthem. The firm has no responsibility for stakewatcher and stakekeeper.

Figure 3 provides a framework of stakemodel. Stake model enables management tomap and, ideally, manage the firm’s relation-ship (present and potential) with groups toreach ”win-win” collaborative outcomes.Weis (2008) notes that ”win-win” meansmaking moral decisions that benefit all conti-tuencies (parties) within the constrains ofjustice, fairness, and economic interest. Figure3 shows the difference of Freeman’s previousconcept. The figure shows that the mana-gement is the center (axis). In other words,Fassin (2009) differentiates between firm’smanagement and firm itself. Another diffe-rence is that he replaces the square that limitsthe border of primary stakeholder and secon-dary stakeholder, with oval. This oval formdoes not limit the border between primaryand secondary stakeholders, but limits theborder between “real stakeholder” and “stakewatcher”. The relationship between mana-gement and “real stakeholder” is reciprocal.Meanwhile, the relationship between thestakewatcher and stakekeeper is described

beyond the oval and does not have anyreciprocal relationship, but rather, unilateral.Such this unilateral relationship has the na-ture of influencing and controlling. An interesting thing is that each real stakeholder hasminimally one specific stakewatcher. Stake-keeper may influence more than 1 real stake-holder and stakewatcher.

RESEARCH METHODBrodsky (2008) mentions that negative

case analysis is a central data analytic ap-proach in qualitative methods and is essentialto the rigor of most data analytic plans. It isnecessitated by purposely sought or spon-taneously appearing pieces of data that differfrom the researcher’s expectations, assump-tions, or working theories. In this study, wecollect data from mass media about CSR andmake a negative or deviant case analysis forunethical behavior.

Population and SampleThe population at this phase is all news

in KOMPAS. This study selects KOMPAS forseveral reasons: (1) KOMPAS is a nationaldaily newspaper; (2) KOMPAS is the dailywith the largest circulation; (3) KOMPAS isindependent. Independent means “existingseparately and not influenced or controlledby other people, organizations, or the govern-


ment” (Longman, 2003). Until the data wascollected, KOMPAS was not listed in thestock exchange. Furthermore, in reportingKOMPAS always covers both sides. It refersto the balanced reporting that involves bothsides. In other words, KOMPAS givesopportunities to different sides in viewing theissues or reports about boycott; and (4)KOMPAS has all-Indonesia coverage, boththe news content and the distribution. Thiscan be seen from the fact that KOMPAS hasremote printing system, KOMPAS update, aswell as the website www.kompas.com.Meanwhile, the scope of the study is the newsthat meets the following criteria: (1) the newsis about boycott product; and (2) the news isput in KOMPAS since the beginning to theend of the observation Meanwhile, the scopeof the study is the news that meet thefollowing criteria: (1) the news is about CSR;and (2) the news is put in Kompas since thebeginning to the end of the observation, thatis from 1 January 2005 to 31 December 2007or during 3 years. The observation took longtime because it took long time to pass theLaw of Limited Liability Corporate (Persero-an Terbatas), since it was in the form of Draftproposed by the government (12 October2005), until it was passed (20 July 2007) (seeAppendix 1) .

Sampling is crucial to all forms of thecontent analysis (Sumser, 2001). If we want todiscuss the relatively weak roles that womenhave in film, we cannot mention only thosefilms in which women have weak roles. Wemust choose a sample that represents apopulation, which means we must selectfilms that are representative of the kind offilms we are talking about. The sample usedat this phase is saturation sampling. Blackand Champion (1976) mention that saturationsampling is defined as the gather of allsample elements in a particular populationhaving the characteristics needed by theresearcher.

Operational Definition of VariableAn operational definition of variable tells

how we will measure something and forces

us to explain how we understand or interpreta concept (Berger 2011). Barelson (1952);Kassarjian (1977) informs that in contentanalysis, unit of analysis can be word,themes, characters, items, and space-and-timemeasures. In this study the variables were theitems or the observed unit of analysis whichoperational definition are:a) Stakeholders are any groups and indi-vidual having the interest in the achievementof organizational objectives and thus influ-ence the achievement of the objectives.Stakeholder can be classified into real stake-holder, who possess a legitimate claim,power and influence are reciprocal, the firmhas responsibility for them; stakewatchers,who look after a stake with care, attention,and scrutiny, just as watch dog do; stake-keepers, who have no stake in the firm buthave influence and control.b) Unethical is the behavior that is not inaccordance with the prevailing norms andregulations. Because this study uses stake-holder theory, then unethical behavior offirms here is meant to be the behavior offirms that does not put serious attention tostakeholder, or in other words the firms’behavior merely focuses on the owner butneglects other stakeholders.c) Names of firm can be a trade mark,legally registered to differentiate it from oherproducts.

Data AnalysisBerelson (1952) informs that validity in

content analysis is not a big matter. Bycarefully defined operational variables andcarefully selected indicators, the coding sheetis assumed to be able to measure what it hasto measure. Meanwhile Kassarjian (1977)informs that validity in content analysis canbe tested by face validity. Neuman (2009)informs that face validity is a judgment by ascientific community that the indicator reallymeasures the construct. The reliability of thestudy was tested by inter coder reliabilitytest. The testing was made to ensure objecti-vity and reliability of the analyzed data inanalysis technique of the news studied. In the


study, reliability was measured by the valueof Holsti’s coefficient of reliability (1963).

21

2,1 )(2

CC

CR

where C 1,2 = the number of catagory assign-ments on which all coder agree; C1, C2= thesum of all catagory assignments by all coder.The obtained results of the coding were thenanalyzed by descriptive analyses. Descriptiveanalysis was performed by contextualizingthe news. Contextualization was performedby coding the consensus and differenceamong the text and presented some citationsfrom the news to strengthen arguments.

RESULTSThe preparation of the coding sheet was

consulted to a researcher at the Pusat KajianBudaya and Media Populer (see Appendix 2and 3). Then, with the assistance from aresearcher from the Lembaga Pengabdianpada Society UGM, the reliability is tested.There is a difference in determining the

threshold score of acceptance of the reliabilitycoefficient. Krippendorf (2012) reports thatthe lower limit of acceptance of reliabilitycoefficient is 0.80; Scott in Hasrullah (2001)put it over 0.75; while Berelson (1952) put thecoefficient score between 0.79 and 0.96. thecalculation of reliability at this study is 0.89 orabove the score proposed by Krippendorfand Scott, and between the range suggestedby Berelson (See Appendix 4).

Mass media portrays firm unethicalbehavior

Of the total 69 news reports, there were 21news reports presented in the format ofopinion, and 48 titles of news was in theformat of news/features. About the columnof presentation, 2 news reports were put atthe headlines, 1 news report at the editorialcolumn. From the collected samples of news,some firms have had unethical behavior (seetable 1).

Figure 1Time Line Sample Collected

Table 1Publishing Date, Reported, and Type of Unethical Behavior

No PublishingDate Reported Type of Unethical

Behavior1 29/6/2006 The firm caused mud flood in Sidoarjo

Advertisement goods/services that made the societystupid

External (society atlarge)

2 1/9/2006 Social Inequity. The society around the firm is in poorcondition, while the region is rich of natural resource.



3 7/9/2006 Implementing the programs not needed by thesociety.Unsustainable programs.


4 8/9/2006 Government and entrepreneurs collaborativelyendanger natural environment and socialenvironment, system, and institution.Class action to the contamination of Teluk Buyat.After the signing of memorandum of commitmentbetween the government and the firm, the class actionwas abrogated.

External(Governments)

5 13/9/2006 Use of force by the government apparatus in exercisecontrol over natural resource


6 4/10/2006 The firm insisted the government to state that“Sidoarjo mud” is a national disaster.Silent collusion.Robbery of state money by the scandal of IndonesianBank Liquidity Subsidy.Cost externalization.Ecological damage, stealing of governmental budgetand tax, community evacuation.


7 6/10/2006 Use of such idioms as “difficult moment”, “ it is luckythat the firm is still operating” to suppress the rightsof the employees to receive the Hari Raya allowance.

Internal

8 26/10/2006 Ignoring the community around the firm.Land is returned in damaged condition.Damage of local custom and tradition.Potential horizontal and vertical conflict.


9 24/3/2007 Use of force by the government to take over themanagement of mud disaster.Cost recovery, delayed accountability that potentiallyresulting in chaos; limited responsibility as specifiedin the Presidential Decision.


10 24/5/2007 Damage of Citarum Watershed Flow (damage ofagricultural land and protected forest in watershed(water capture region).Employing local criminals to secure the propertyfrom public protests.Companies and the activities are basically greedy,cruel, and heartless to do anything to maximizecapital.


11 28/5/2007 Racial discrimination, xenophobia and intolerance,contemporary racism, women being the largest groupdiscriminated in work opportunity and wage ,outsourcing (contractual laborer).High turn over because even professional workers arejust like unimportant component of productionmachines.

Internal

12 22/7/2007 Many companies ignore the surrounding community External (society atlarge)

13 2/8/2007 Conglomerates nag the government to overcome thefinancial crisis through the Indonesian Bank Liquidity



Subsidy, on the other hand, they violate theregulations made by the government.

14 4/8/2007 Disobey fair trade (if possible) External (society atlarge)

15 4/8/2007 Destroying public social structure and inhibiting anyattempt to create safe, healthy, and joyful world.Mark up of over 40% as compensation given to thetour guide leading the tourists to their shops.Use of dual standard of domestic and foreignbehaviors. Domestically, the enterprises are ethicalfirm, in foreign countries they are unethical.Damaging the environment and exploiting thelaborers, bribing to win projects, manipulatingfinancial report (cost recovery and transfer pricing),tax embezzlement, corruption.Exploiting the laborers for years.Environmental pollution.Assassinating and toppling the authorizedgovernment and replacing with the person willing towork on behalf of them.


16 15/8/2007 Ignoring social affairs matters, human right issues,and community development.Causing global warming, economic discrepancy,expensive education and health.


17 4/10/2007 Disposing liquid waste directly or indirectly to rivers External (society atlarge)

18 16/11/2007 Environmental damage resulting from mud flow.Advertisement with false claim.Environmental damage causing the people to losetheir public rights such as land possesion, profession,and welfare.


19 10/12/2007 Minimal reclamation causing severe environmentalloss for the society.Disorganized reclamation of mining regions.


Table 1 shows that of 69 news in thesample, 19 (27.5%) reported firm unethicalbehavior. Clement (2006) informs that somebehaviors may be perceived unethical forsomeone, but may be perceived differently byanother. Having nearly similar opinion,Frederick et al. (1992) inform that law may besimilar to ethics, but sometimes the similarityis not identical. In general, law is the basicformulated ethical principle specifying whatis right and what is wrong. Table 1 showsthat some unethical behaviors such as out-sourcing have been in accordance with the

prevailing law, but ethically or morally it isnot ethical.

“The results of the study conducted byForum Pendamping Buruh Nasional(FPBN) in 2005-2006 in Tengerang andBekasi showed that of 92 firms studied, 62%used out-sourcing (contractual laborer) and50% were women. The contracts were madeon monthly basis, even some others areweekly. It means that approaching the endof the current month, there is uncertaintyabout another term of employment. Thisstudy also showed that laborers who wererecruited by labor supplier have to pay the


fee of Rp 300.000-Rp 600.000 for a three-month contract and up to Rp 900.000 forsix-month contract. The condition gets evenmore complicated when the labor supplier isalso the employer. They get double benefits.Contractual employment system preventsthe laborers are disimssed without anytermination compensation, while the laborsuppliers charged fee from laborers’ wage,”(Hartiningsih, 28/5/07).

Mass media writes names of firms havingengaged in unethical behavior

Of the sample of 69 articles collected,there are 20 names of firms reported to beengaged in unethical behavior. The detail ofnames, reported unethical behaviors on print-ed media, and dates of report are presentedin table 2.

Table 2 shows that not all firms engagedin unethical behavior in Indonesia were thedomestic firms. Some firms such as PT.Newmont Pacific Nusantara, PT. Freeport,PT. Nusa Halmahera Minerals, Nike, Nestle,

3M, DuPont, and Shell were multinationalfirms whose capital partly invested by thecitizen of Indonesia. Meanwhile, such firmsas Enron, Athur Andersen, WorldCom,Global Crossing, Tyco, Gap, Levi Strauss,although not operating in Indonesia, werereported to be the firms engaged in unethicalbehavior.

It is interesting to see what Priyono(4/10/2006) had written. He urged boycot tothe firms, as a legal way of public movement:

”... If a performance of a firm endangers theenvironment and local society, we can take apiece of paper and make some columns. Thefirst column contains the names of firms.The second column contains trademarks ofgoods/ services along with the visualdisplay. The fourth column contains detailof market, buyers, local, national, and globaltargets. What for? For pubic movement ofproduct boycott until the firm makesbetterment...”

Table 2Firms, Unethical Behaviors Reported on Media, and Published Date

No Firms Unethical Behavior

1. Enron, AthurAndersen,WorldCom, GlobalCrossing, Tyco

Not mentioned. However Latief (2006) wrote that Enron went bankruptbecause it engaged in window dressing, that was manipulatingfinancial reports to camouflage its poor performance

2. PT. Newmont PacificNusantara

It was reported that it disposed environmental pollutant (tailing) atTeluk Buyat. The government claimed PT Newmont to civil court, butthe claim was abrogated after the government and PT Newmont signedthe agreement of compensation of $ 300 million.

Conflict between the enterprise and the society, but then left notresolved because of silent collusion.

Damaging environment and exploiting laborers

3. PT. Freeport Conflict between the enterprise and the society, but then blurred byother issues because of silent collusion.

Resulting in negative impact of exploration.

4. PT. Nusa HalmaheraMinerals

The people live in poverty, low education, reduced income offishermen, decreased income from copra, nutmeg, and clove, moreillegal miners. Ironically, a multinational enterprise of Australia isoperating the exploration activity in the region.


5. Lapindo Uncertain compensation for the victims of hot mud Lapindo.

Uncertainty and frustration potentially result in more chaotic actionssuch as the blockage of roads by the residents of Tanggulangin AnggunSejahtera (Perumtas) 1 some time ago.

Shareholders’ limited liability enables the enterprise to generateunlimited profit. But when they have to deal with problems, theirliability is limited in the capital that they invest.

Claiming through advertisement that the mud outpouring was notbecause of mis-drilling, and that the victims are properly treated.

6. PT. Energi MegaPersada

The firm overtly stated that it will claim the cost expended by Lapindoto the government through the scheme of cost recovery.

7. PT. Aneka Tambang(Antam)

After the mining, proper reclamation was not made.

Although it has been in operation for decades, it failed to increase theLocal Indigenous Revenue of Purworejo.Leaving unfilled dangerous holes.The vegetation in the reclamation is not as specified in the initial plan.

8. Nike, Gap, LeviStrauss, Nestle, 3M,DuPont, Shell

Environmental damage and labors exploitation

9. PT Timah Negative impact of exploration in former mining over areas

ANALYISIS AND DISCUSSIONNeoclassic view suggested that the objec

tive of firms is merely improving the welfareof the owner. In stricted competition, it ispossible that firms behave unethically toreach their objective. This is apparent in thefirms dealing with public welfare, wheregovernmental authorities play important role(business to Government). Paul Ricoeur inPieris & Jim (2007) relates the term moral andethic in two different philosophical streams.The term moral is related to the philosophicaltradition of Imanuel Kant (deontologist),while ethic is related to the thought ofAristoteles (finality and objecive). Velasquez(2011) suggests that although ethic is closelyrelated with morality, but not fully similar tomorality. Ethic is a kind of analysis, whilemorality is the subject.

Talking about ethic is talking aboutdecency of an action; not about whether it iswright or wrong. Thus there will always be adifference between a person and another.Stone in Weiss (2008) informs that ethic is “a

grey area”. Legal rules cannot cover allaspects of ethic. Likewise the question ofwhether ethical standard can be applied tofirm. Can the firm be accountable for theconsequence of an unethical action? Can ethicand business be mixed? Velasquez (2011),quoting John Searle, informs that:1. Firms “exist” only if: (1) there ara parti-

cular individual humans in the particularscope and relation; and (2) our linguisticand social conversion suggested that whensuch individuals are there in such scopeand relation, they can be called be a firm(corporate organization).

2. Firms “exist” only if: (1) there are parti-cular individual humans in organizationtaking particular action in particular envi-ronment; and (2) our linguistic and socialconvention suggested when such indi-viduals take such an action in such anenvironment, this can be called firms’action.

Meanwhile, DeGeorge in Weiss (2008)argues that “business is immoral” is merely a


myth. Business is human activity. It is notmerely knowledge so that it can be evaluatedfrom moral perspective. For example, Rao &Hamilton III (1996) examine the correlationbetween ethic and profitability. They findthat firms with unethical behavior publishedin mass media have lower profit than theaverage share index; Frooman (1997) has ameta–analysis to 27 studies using event studymethod and finds that firms with sociallyirresponsible and have illicit behavior have anegative shareholder wealth. On the otherhand, firms with socially responsible beha-vior have a positive shareholder wealth (I.e:Meznar, Night, & Kwok (1994); Davidson,Worrell, and Cheng (1994); Hendricks andSinghal (1996); Pusnikoff (1997)

By taking the publication of firms’ CSRactivity in a national daily, that according tomajority of people CSR is a form of ethicalbehavior, this study attempts to describefirms’ unethical behavior by performingdeviant-case analysis. In this study, deviant-case analysis is performed by describingfirms’ behavior not related to CSR but ispublicized at the same time as the news aboutCSR. By using stakeholder theory to describethe unethical behavior, we can state that ifthere is firms’ behavior that ignores theinterest of one of stakeholder the firm hasdone unethical behavior.

To classify this unethical behavior inorder to be measureable, we use moralattitude standard of human as the analogy.Humans’ moral attitude can classify into 4classes. They are humans’ moral attitude toGod, personal, society and Governments. Inreligion, it is known as Hablum Minallah andHablum Minannass.

As previously mentioned, we make ana-logy of firms’ moral attitude as humans’moral attitude. Because moral attitude to Godis too abstract to be applied in firm, then thismoral attitude can be eliminated. Therefore,firms’ moral attitude only consists of moralattitude to personal, society at large, andGovernments. Moral attitude to firm’s per-

sonal is the behavior related to internalparties in the firm. Meanwhile moral attitudeto society and Governments is the behaviorrelated to external parties of the firm.

Figure 3 shows that unethical behaviorof firms can be directed to internal parties offirm (owners, suppliers, employees, creditors,and customers), and to external parties(Governments and society at large). It isclassified unethical to Governments when thefirm’s behavior is colely related with prevai-ling legal rules. Unethical to Governmentshere covers bilateral relationship (relation-ship with other Governments beyond theGovernments where the firm operates).Meanwhile unethical behavior to society atlarge is more general and is usually notrelated with legal rules. In other words,unethical behavior to society at large is colelyrelated with customs, tradition, and normprevailing in the society.

CONCLUSION, SUGGESTION, ANDLIMITATIONConclusion

The objecives of this study are: (1)identifying unethical behavior of firms; and(2) classifying unethical behavior of firms inorder to be qualitatively measurable. Becauseof ethical relativism (different perceptionabout ethical values in different societies),this study used the method of deviant-caseanalysis.

Deviant-case analysis is made in therelease of news about CSR in mass media.The results of the analysis showed that thereare some unethical behaviors of firms. Theseunethical behaviors can be classified intounethical behavior directed internally to firmand those directed externally to Governmentsand society at large. Because these unethicalbehaviors can result in disadvantages to thefirm (for example, labor strike in PT Freeport,the blocking access to the mining site ofdi PT Newmont) it would be better that indi-viduals in a firm predict the consequence thatmay result from the firm’s action plan.


Figure 2Human Being Moral Standard

Figure 3Firm’s Unethical Behavior Classification

This study uses news in mass media asthe data source, which is analyzed by contentanalysis, why? Wright (1985) mentions thatalthough we are frequently faced up to masscommunication, the personal experience islimited and selective in nature. It means thatit is not possible for us to take all contents ofmass media (reading newspaper, listening tothe radio, watching television, browsing

internet sites). Furthermore, because we arevery selective in responding to communi-cation blow, our knowledge about what isbeing reported is biased by our personalpreference. Performing content analysis inmass media will systematically andobjectively describe the content of the ongo-ing protest. Stokes (2006) states that one ofthe benefits of content analysis is that content


analysis enables us to result in reliable factsand numbers to support and prove ourarguments. Adiputra (2008) states that someof the advantages of content analysis include(1) it does not use humans as the object ofstudy. Content analysis is a non-reactiveanalysis because nobody is interviewed,asked to fill up questionnaires, or requestedto go to laboratory; (2) it is cost-effective anddata source is easily accessible. Such thisadvantage depends very much on the scopeand dimensions to be examined. However, ingeneral content analysis does not requirelarge sum of costs; (3) it can be employedwhen survey study is not possible to perform,for example the study about political conflict,religious conflict and many others; and (4) itis operationable quantitatively and quali-tatively.

This study contributes to improving ourunderstanding that business is closely relatedwith ethic. From the perspective of agendasetting theory, we can see that there is apositive correlation between agenda of socie-ty and agenda of media. When there is apolemic in the society about whether or notCSR is regulated to the firms dealing withnatural resources mass media capture thatissue and release the news. Implicitly, inorder to support the policy, mass media alsorelease newas about firms’ unethical behavioras comparison. From the perspective of stake-holder theory, we can see that there are anygroup or individual influence and are influ-enced by firms’ operation. Unfair behavior tothe stakeholders can result in a problem forthe firm. Firms can be accused of havingunethical behavior that finally results inprotest from the stakeholders.

Limitation and SuggestionAs a preliminary study, we do realize

that this study has some limitatation. Onlyone print media was used, the Kompas Daily,which is a national general newspaper (notnewspaper special for economy). It will bebetter if the study used more print media andused economic newspaper for comparison. Inaddition, the use of electronic media will give

more comprehensive analysis. The results ofanalysis show that some firms were reportedto have engaged in unethical behavior butalso reported to have ethical behavior (CSR)at once. This phenomenon gives an oppor-tunity to have further study about consu-mers’ attitude to the firm and the products. Inaddition, it is also necessary to study aboutwhether or not consumers will give eitherreward or punishment to ethical or unethicalfirms. Reward can be in the form of purchaseintention, while punishment can be in theform of social movement of boycott. For thefirms listed in the stock exchange, this can beseen from how shareholder wealth of thefirms with either ethical or unethical beha-vior.

AcknowledgementsWe gratefully acknowledge the assis-

tances made by Anna Susilaningtyas from theCenter for Culture and Popular MediaResearch, Arina Pramusita from the Institutefor Research and Community Services,Gadjah Mada University (GMU), the com-ments made by Aneka Prawesti Suka fromInstitute of Social Studies, as well as theanonymous reviewers for their comments onthis article. The first author would like todedicate this research article to ProfessorBasu Swastha Dharmmesta and B.M.Purwanto, from Faculty of Economics andBusiness, GMU, and Moira M.M. Moelionofrom Center for International Forestry Re-search. An earlier version of this article waspresented at “The 5th Symposium of Econo-mics Research: Memacu Pertumbuhan Eko-nomi Menuju Kemandirian Bangsa”, October7, 2011, UPN “Veteran”, Surabaya.

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