Andrs Riera

06.06.2014
1


Business with an authoritarian ruled country:
Ethical research on Stadler Rails decision to sell trains to Belarus
Stadler Rail was established 1942 in Switzerland and grew fast until it became an important enterprise
producing trains and metros. In 2010 they decided to sell trains to Belarus. This decision was harsh
criticized by the press because Belarus is governed by an authoritarian regime which does not respect
Human Rights. Peter Spuhler, CEO of Stadler Rail, proceeded doing business in Belarus, claiming
that he was acting morally and that it was his right as businessman to expand into other countries. In
2012 the joint venture, called Stadler Minsk, was created to fabricate trains in Belarus.
"I will personally supervise the construction of the production plant."
(A. Lukaschenko, quoted in the Newspaper, Handleszeitung, 2013)

It is obvious that Belarus president Alexander Lukaschenko is very interested in the success of this
joint venture. This gives rise to the question, how much influence he wants and should have over the
new enterprise.
In international business context it is essential that an enterprise cooperates with the countries they
supply. Since an enterprise is allowed to use the local infrastructure from a country, it is advantageous
to cultivate a good relationship with the government. Of course enterprises are also obliged to conform
to local law. Referring to our Stadler Rail case, where an enterprise settles down in a country whose
government does not respect basic moral principles, the usefulness of cooperation with the
government becomes questionable. The government of Belarus infringed several Human Rights, like
not providing freedom of speech, death penalty and vote fixing. Also the economy in Belarus is not
liberal and corruption is a big problem. The EU already sanctioned many corrupt politicians and
several enterprises (Hebel, 2012). Consequently Peter Spuhlers decision to start an affair in Belarus
must be ethical reviewed. P. Spuhler could decide between three alternatives back in 2010. One
alternative was to produce the trains in Switzerland and sell them to Belarus. The other possibility was
to sell and produce trains in Belarus. The last alternative was simply not to make a deal with Belarus.
Ethics played an important role in this decision since A. Lukaschenko is a dictator neglecting Human
Rights and P. Spuhler was a Swiss politician at the same time. P. Spuhler was a member of the Swiss
national committee representing the SVP
1
. As a member of the Swiss national committee he ought to
represent the will of the folk and therefore defend the idea of a free democracy. In this case it is utterly
important to precisely define the interests and duties these two players have since they are persons of
public importance. By analyzing the interests of Peter Spuhler and Alexander Lukaschenko I will show

1
Schweizerische Volkspartei
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the moral conflicts caused by the deal. Finally I will deduce why P. Spuhler acted morally right, by
taking the decision to start the joint venture in Belarus. He acted morally right because his efforts in
providing public transportation to a poor country satisfy the population. Also he created new jobs while
even enhancing the standard working conditions.
With the decision to sell trains, P. Spuhler follows one goal in general. The legitimate goal each CEO
has, is gaining profit to enable long-term growth. Thus we can argue that this goal is a pure economic
interest that should be conducted within moral boundaries. On the other side we have Alexander
Lukaschenko. His interest is to upgrade the public transports. The reason why he is doing so is
unclear. Maybe he wants to help the folk by enhancing mobility or he just pursues the motive to repair
his bad image in the international context. Because of this uncertainty we cannot argue in a
deontological way if he is acting morally right. We simply do not know if his end is to help the folk or if
he just uses the deal as a mean to enhance his image. However, from a consequentialist perspective
there is no reason to criticize Lukaschenkos decision to buy trains. These trains are only designed for
public transport, therefore, they cannot be used to strengthen the regime or the military. The idea to
sell trains to Belarus is rational in an economic sense and also morally right.
Through a consequentialist approach we have now asserted that selling trains is morally right, but the
critical decision made by P. Spuhler yet has to come. In 2012 he decided to launch a joint venture with
Belkommunmash, an enterprise situated in Belarus. Like this Stadler Rail can reduce production- and
transport-costs. It is important to mention that Stadler Rail holds the bulk of the participation, thus they
have more influence (Hehli, 2012). Now we must verify if new moral conflicts appear by producing
trains in Belarus. At this point a new interest group appears; the workers in the fabric. Their Human
Rights must be defended and the employees deserve dignified working conditions, as it is the case in
Switzerland. Stadler Rail must supervise the working conditions in their fabric to act morally right. In
this special case, where Stadler Rail works together with Belkommunmash it is essential to convince
the former enterprise to act like Stadler Rails wants. Stadler rail has to maintain a strong position
against Belkamush and the government to implement European business standards. These business
standards rest upon essential values like the Human Rights and are expanded following the ethical
perception of the corporation. Many Influential philosophers claim, that ethical theories must be right-
based. Other philosophers like e.g. Immanuel Kant claim that to act morally, one just has to follow
certain principles or rules. These rules are similar to obligations. To follow such obligations is
indisputable a good moral approach. One representative of the Rights Theory is Robert Nozick; he
argues that rights always have precedence over obligation because all obligations are deducible from
rights (Beauchamp 2008). In other words, rights legitimate obligations; therefore, they motivate people
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to follow ethical rules such as the principle of the Categorical Imperative from Immanuel Kant. An
important right in business context is article 23 of the Universal Declaration of Rights: Everyone has
the right to work, to free choice of employment, to just and favourable conditions of work Employers
follow the obligation not to enslave humans, because they respect this Human Right. To come back to
the joint venture from Stadler Rail, it would make sense to introduce Codes of Conduct stating the
rights of the employees, especially because the government of Belarus has a record of extensive
violation of Human Rights. For the realization it is crucial not to change ones moral principles just
because other cultures may think different. In other words, an enterprise should not use the ethical
idea of cultural relativism as pretext to implement different moral rights in different countries. The
maxim when in Rome do so as the Romans is simply a false approach to act morally (Hill, 2011). The
big advantage of Right Theories in form of Codes of Conduct is that employees and other
stakeholders are enabled to rigorously accuse Stadler Rail, if working circumstances were
unacceptable, by referring to particular articles from the Codes of Conduct.
Since 2012 we were not told about any trouble concerning the joint venture in Belarus, also Stadler
Rail is very unlikely to implement bad working conditions. Stadler Rail produces high quality products
and does not fear about concurrence in Belarus so it might provide above-average working conditions.
Now we have stated that both alternatives P. Spuhler faced in 2010 are legitimate and morally
maintainable. The first alternative was only to sell trains to Belarus and the second was even to
produce the trains throughout a joint venture in Belarus. Apparently P. Spuhler has opted for the
second one. At this point the decision can be made out of pure economic interests, since the two
alternatives prove to be morally right. Some people would argue that P. Spuhler must choose the
alternative, which is morally better. Lets say if he produces trains in Belarus, he creates new jobs
while even enhancing the standard working conditions. This would be clearly better from an utilitarian
perspective, than just selling trains. Here I have to mention that no jobs were cut in Switzerland, since
a big part of the prefabricates for Belarus are still produced there. Now that P. Spuhler knew that both
alternatives are morally maintainable, Should he have opted for the alternative which is more
profitable in economical terms or for the one that is morally superior? When I refer to economic
interests, I mean the maximization of profit, only considering alternatives which are morally right.
Unfortunately we cannot observe if he decided whether out of moral or economic interests, because
by choosing to produce in Belarus he reached the moral and economical optimum.

To understand the full extent of this decision, assume that selling the trains to Belarus would be more
profitable than produce them on the spot. Of course in this case this is not true but it is a hypothetical
question worth considering. Should P. Spuhler still decide to produce the trains in Belarus, since this
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would create benefits for local employees? Or should he just sell the trains instead, since this would
be more profitable in economic terms? To answer this question, we need to focus on the responsibility
Peter Spuhler has as CEO of an enterprise. A distinction commonly made is a tripartite division of
business responsibilities. We differ between legal, economic and social responsibility. P. Spuhler
should gain profit for the shareholders, he should do this in a legal way and at the same time he must
act socially. Apparently the social responsibility plays an important role in business nowadays. Many
Experts even claim that enterprises as a whole have a social responsibility, called Corporate Social
Responsibility (CSR). Some, such as Carroll (Carroll, 1979) adopts certain aspects of CSR as a moral
duty. Therefore, he defines precisely that social responsibility is composed of ethical responsibility and
discretional responsibility. Decisions referring to ethical responsibility should be made, following moral
duties. Decisions referring to discretional responsibility are not linked to moral duties; they can be
seen as philanthropic acts to gratify society (Dubbink, 2008). As an example, consider an enterprise
that decides to sponsor a regional sports club. Because of this voluntary decision the enterprise
assumes social responsibility, even though society did not expect this from the enterprise. In the
Stadler Rail case P. Spuhler first had the ethical responsibility to ensure that both decisions (only sell
trains or locally produce trains) are morally maintainable, which we proved to be true. Subsequent he
had to decide between both alternatives. On the one hand he could have assumed economical
responsibility to gain profits. On the other hand he could have assumed the discretionary responsibility
by voluntary deciding to produce the trains in Belarus and help the poor folk. This decision is
completely voluntary, because it does not concern any moral duties. The decision now only depends
on the ability and willingness of the shareholders (including P. Spuhler) to act altruistic. In the
hypothetical situation where, selling the trains to Belarus would be more profitable than produce them
on the spot, there would be no moral conflict if P. Spuhler acted selfishly and just sold the trains.
After Peters Spuhlers decision to start the joint venture in in Belarus heaps of bad headlines appeared
in Swiss newspapers. As we stated earlier, this decision by itself is not morally wrong, but was
nonetheless harsh criticized. The point is that he was an important member from the Swiss national
committee at the time of the deal. Because he represented the SVP which is right winged, the press
could easily criticize him for not acting as a good example. As a good politician and especially as a
rather right winged and conservative politician, one should act as good example, protecting the
democracy and fighting against corruption. Maybe the press exaggerated and stated that P. Spuhler
cooperated closely with the corrupt regime. It is definitely not easy to be a good politician and
businessman at the same time. It could be that this was one of the reasons for his retirement from
politics. But there is one advantage of him being politician, namely his salient identity as member of
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the SVP. As politician you are under perpetual observation and this could positively affect the moral
behavior.
Another important reason why he was constantly criticized by the press could be the way he tried to
justify himself for his actions. As a politician but also as businessman you must justify your actions,
because you represent the folk respectively the shareholders. In fact P. Spuhler tried to justify himself
in an interview with 20Minuten:
For us it is impossible to verify the constitutionality of every country or even to force the
implementation of a democracy. This task should be performed by national politics or the UNO.
Switzerland and the EU also have a diplomatic relationship with Belarus. We do not infringe sanctions
or embargos of any kind. Of course if there were sanctions, we would obey.
First of all, this justification is contradictory because as a Politician P. Spuhler could influence the
implementation of embargos, if it was necessary. He would be better of saying that there is no need
for embargos, because selling trains is morally the right thing to do. Second, he straggles from the
main subject, of course no one expects him to spread democracy all around the world. And third, it
seems that he neglects the importance of moral duties as he states that they are acting legit. Ethics
should always be superior to rights because ethical reflection gives advice to every particular decision,
whereas rights are deduced from ethics and denote general rules. This interview could be a hint that
P. Spuhler reflected insufficiently about the moral aspects of the deal. In this case he could have even
strengthened his position with the argument that it is morally right to produce trains in Belarus. Instead
he just stated that was doing nothing wrong.
In my analysis I went through two decisions made by CEO Peter Spuhler. He first sold trains to
Belarus and then he launched a joint venture to locally produce the trains. Both deals demanded
negotiations and thus cooperation with Alexander Lukaschenko because the public transit is
government-run. The main conflict is that Belarus is governed by an authoritarian regime which does
not respect Human Rights. Through a consequentialist approach we have seen that it is morally
unproblematic to sell the trains. Furthermore, the joint venture should not cause any moral conflict if
the Codes of Conduct were satisfied. Peter Spuhler provided Belarus with public transportation and
also created new jobs. Both decisions are morally right because they do not strengthen the corrupt
regime in any sense. Furthermore this decisions lead to an altruistic side effect by enhancing living
conditions in Belarus. Peter Spuhler special role as politician was the main reason for the critics stated
in the newspaper. Probably the only error he made, were his insufficient justifications in the press,
which showed a lack of ethical reflection about his decisions.
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References:

Btikofer, C., & Eiselin, S. (2013, April 11). Lukaschenko zu Spuhler: berwache Bau persnlich.
Handelszeitung. Retrieved April 25, 2014, from http://www.handelszeitung.ch/politik/lukaschenko-zu-spuhler-
ueberwache-bau-persoenlich

Hebel, Christina. "Weirussland: EU verschrft Sanktionen gegen Minsk." spiegel deutschland 23 Mar. 2012.
Web. 25 Apr. 2014. <http://www.spiegel.de/politik/ausland/eu-verschaerft-sanktionen-gegen-weissrussland-
und-praesident-lukaschenko-a-823432.html>.

Hehli, Simon. "Wir liefern Zge, keine Waffen!." 20 Minuten 13 July 2012. Web. 27 Apr. 2014.
<http://www.20min.ch/finance/news/story/26624643>.

Hill, Charles W. Global Business Today. 7th ed. Washington: McGraw-Hill Higher Education, 2011. 139-41. Print.

Kent Kallstrom in Asbjorn Eide et al, Eds. The Universal Declaration of Human Rights: A Commentary 1992. 357-
358.

Beauchamp, Tom L., Norman E. Bowie, and Denis G. Arnold. Ethical Theory and Business. Pearson/Prentice Hall,
2008. 30-31. Print.

Carroll AB. A three-dimensional conceptual model of corporate performance. Acad Manage Rev 4, 1979. 498-
501.

Dubbink , Liedekerke LV. A Neo-Kantian foundation of Corporate Social Responsibility. Springer Science +
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