Michael Glatt, vice rector at Moscow Touro University, believes that everybody in Russia should study business — and understand the importance and financial benefits of business ethics. The Leader spoke to the three-year Moscow resident and former Chicago lawyer to find out why.

What does the term "business ethics" mean?
It is a philosophy that helps a company determine its behavior toward customers, suppliers, shareholders, employees, and a community where it is located. Notice that ethics is not the same as law because, in my opinion, something can be legal but not ethical.

So you argue that ethical business practices are a much more efficient way of generating wealth?
Yes. Here’s an example: You go into McDonald’s, pay 30 rubles and get a hamburger. From an economic perspective, there is no distinction between "legal" and "illegal," between "ethical" and "unethical:" Let’s imagine you bribed the cashier and she pocketed the money instead of putting it in the McDonalds’ cash register.

If the cashier pockets the money, she now has to bribe the cook to make the hamburger. In turn, the cook will have to bribe the manager who orders supplies from the factory, etc.
Each briber has to negotiate a separate deal at massive cost in time and energy. The result is massive inefficiency (sound like any country we know?). Now, if your money goes to the McDonald’s cashier, the result is a real business operating with maximum economic efficiency. The best business is the most efficient business, and since unethical behavior causes inefficiency, it also results in low quality and high prices.

Do you take a line with your students on bribery and corruption?
I don’t push them into any particular direction. I simply require that they appreciate the economic impact of certain behavior. If you pay a bribe, that means you are paying a tax, and your cost rises. That means you have to charge more.

Would you say that you take a very practical approach to business ethics?
It is practical because I expect students to weigh the advantages and the disadvantages of unethical behavior. But the key point is that businesses should be ethical for one reason — because it’s profitable.

How are business ethics understood in Russia today?
The situation is changing quickly. As a business gains a reputation, it becomes much more important to protect it, because the company has invested time and effort in establishing it. Russia now has 10 years of experience in operating in a free-market economy, which means some businesses have invested 10 years into building their reputations. Russian businesspeople are starting to understand that acting ethically and, therefore, protecting one’s reputation, has economic advantages.

How do you foresee the development of business ethics in Russia?
There is a tendency in this country to think that the answer is more law, more government regulations. For example, some advocate developing a code of corporate conduct and making it a requirement. But we have to remember that regulations always arrive with a high price tag, so it is better to let the market determine the conduct, wherever possible.
I fear Russia could just become more and more regulated, whereas the tendency in the West is deregulation. The market is much better at pointing to an ethical and, therefore, economically advantageous behavior.
The problem with short-term players is that they don’t care about their reputation. A short-term player’s behavior is far different from that of a long-term player who doesn’t look at just one customer, but the next 100 customers. As the number of these businesses in Russia grows— and it grows daily — it forces everybody to behave in a more ethical and more profitable way.

What is the key point you try to get across to your students?
The problem is not being able to measure the cost of your behavior. Every decision you make is going to have a consequence on your business and on your own professional reputation. Therefore, think about everything you do — it can help you or hurt you. If businesspeople always keep that idea in mind, they start behaving ethically with no effort.