Global Business and Ethics
This term paper discuss “Global Business and Ethics” that relates to the material covered in the text. Globalization is important to a company because it provides them with the opportunity to reach a much larger consumer base and to generate greater earnings. In order to globalize successfully, companies conduct research continually about the countries it intends to do business in. With the increase of business globalization, management is constantly involved in international environments with ethical challenges.
I will discuss ethical conduct and how difficult it is to manage when a different language and culture is the target. Having customers and employees from different cultures is a challenge. Management will be under a great deal of stress and stakeholders will enormously increase. The purpose of this paper is to (a) describe ethical issues that become evident as a result of globalization; (b) compare ethical perceptions across cultures in regards to the situation; and (c) determine which risk and consequences are associated with the globalization business and ethics.
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The key stakeholders will include foreign governments with different regulations, policies and laws. The text states, “Economic and governmental forces are among the most significant uncontrollable forces for managers. To keep abreast of the latest developments and also to plan for the future, firms for many years have been assessing and forecasting economic conditions at the national and international levels. (Ball, McCulloch, Geringer, Minor, McNett) Many economists have suggested that the main responsibility of a corporation is to make a profit. Milton Friedman, the famous economist, argued that there is “one and only one social responsibility of business–to use its resources and engage in activities designed to increase its profits” (Doing well). Friedman is suggesting that if societies want corporations to put anything ahead of profits, then their government should regulate business accordingly (Doing well, 2000).
Others, such as ethics advisor David Mesick, argue that rapid technological development makes clear ethical standards problematic. Countering both attitudes, Berenbeim argues that without “commonly accepted ethical principles, the emerging global economy will lack the respect for diversity and human dignity that’s essential for its stability and growth” (Reed). In a speech given in 2002, Berenbeim placed ethics at the heart of business concerns, even over such concerns as sustainable development and environmental responsibility.
An examination of international business ethical issues demonstrates that this is a complex topic, but looking after ethical concerns ultimately serves the goal voiced by Friedman, that is, being ethical equates with being profitable and, thereby, fulfills business’s obligations to its shareholders. (Doing well) International Business Ethical Practices As corporations expand globally, new developments and concerns arise daily that might generate problem to organizations.
The need for international business ethical practices within organizations has become critical in day-to-day operations and in avoiding legal issues. With public scandals and misleading practices companies have affected the public’s views and opinions of many organizations. (Doing well) Having a code of conduct guidelines would help corporations follow ethical standards. When ethical norms are in conflict, owning different cultural practices, ethical norms guides businesses conduct in other nations and cultures (Doing well).
There are a few methods that a corporation can employ to improve ethical behaviors from management and employees. It is the job of the corporation through management to communicate proper ethical understanding in the organization by offering training courses of ethics and reward program for all employees. The corporation should also assign an ethics officer and ethics committee that can supervise the completion of ethics policies. Ethical Problems
Organizations with a strong ethical climate experienced a smaller amount of ethical problems and are more successful coping with ethical problems. It is critical for management to consider creating strong ethical climates in order to provide their employees with the ability to handle ethical situations properly. (Talbert) Some examples of unethical behaviors in international organizations are bribes of government officials in foreign countries; child labor in third world countries, discrimination of women and ethnic minorities.
For example, bribery to secure a contract (especially a contract with a public sector body) is against the law and severe penalties can result in disciplinary or criminal actions against a person or company. (Talbert) Code of Conduct The international code of conduct for multinationals was developed by a series of organizations that developed and established standards among multinational corporations; although, some organizations refuse to abide by these codes because national governments have not sanctioned them completely. Talbert) This is a great idea, with corporations conducting business globally; having their own code of conduct within their organizations is needed in order to have a resourceful international and diverse workplace. The code of conduct for multinationals imposes no legal obligations on companies, but only moral obligations on companies and they are not capable of enforcement by the application of external sanctions. (Talbert) The codes of conduct for global companies deal with multiple issues as it relates to their activities.
These codes are not that of the global companies own establishment, nor are they agreements between companies and the businesses that created the codes. Codes have addressed a wide variety of issues, including: relations between multinationals in world markets; environmental standards; labor matters; and health and safety issues as it relates to individual products. (Talbert) The three main factors of codes of conduct for multinationals are: the governments that have adopted them or companies that have subscribed to them; the nature of the substantive provisions of the code; and any related monitoring mechanism. Talbert) Analyzing the Situation The challenges of the business world often make people feel compelled to meet standards of performance. It is because of this pressure that some companies may decide to shift ethics to a low priority, on the mistaken assumption that shortcuts will help them beat their competition (Talbert, 2003). Consistently, many businesses over estimate the value of doing it wrong and underestimate the value of doing it right. Research shows that “doing it right” is profitable.
For example, in one study, 74 percent of purchasing agents surveyed said that they select their vendors based on trust; 88 percent of employees say that they want to work for a company that treats them fairly; and 73 percent of vendors prefer supplying to businesses that are honest and exhibit integrity (Talbert, 2003). As this suggests, ethical practices pay off in a reputation for integrity. In order to establish this, the business community must insist on and enforce a higher standard of ethics (Zuckerman). This does not mean that ethical practice is always easy, particularly in regards to international situations.
Some of the most publicized debates concerning corporate ethics have concerned issues dealing with globalization. When businesses operate abroad, they encounter all kinds of moral issues. For example, companies have to decide whether to meet only local environmental standards and safety codes or abide by the same standards that are in force in their home country. (Doing well) Often environmental standards in developing nations are not the equivalent of those in the more industrialized countries (U. S. ) and this is also true for safety standards.
This issue first came to public attention in 1984 when a Union Carbide plant in India exploded, killing 8000 people (Doing well). Today, most large international corporations set their own global minimal standards in regards to health, safety and the environment (Doing well, 2000). However, enforcing such standards can prove to be difficult when working on joint ventures in foreign countries. Shell withdrew from a joint venture in China because agreement could not be reached regarding environmental and safety issues (Doing well, 2000).
Human right is also a pointed problem for international businesses. Shell, in conjunction with Amnesty International, has written a primer on this topic (Doing well, 2000). One of the prime questions is whether or not a corporation should invest in countries where basic human rights are abused or in countries that forbid outsiders to scrutinize their record on human rights (Doing well). Shell has decided that the answer is “yes,” as long as the company does not take advantage of the situation and that its presence in the country is a “force for good” (Doing well).
The “force for good” argument also comes up in regards to how much large Western companies pay workers in poor countries. Nike, for example, has garnered considerable criticism on this issue. However, Dusty Kidd, the Nike director for labor practices, points out what Nike pays its workers is more than doctors make in Vietnam. “What’s the social cost if a doctor leaves his practice and goes to work for us? ” asks Kidd (Doing well). As this fact demonstrates, the ethical issues of international business are more complicated than one would assume at first glance.
Nevertheless, the experience of both Shell and Nike demonstrates that ethical corporate behavior abroad is possible. These corporations have developed an ethical philosophy that sees it as part of their corporate missions to raise standards, not just within their own company, but in the countries where they work as a whole (Doing well). Nike, for instance, envisions its factories as places where the health of employees will improve through better education and care and where the status of women will also increase (Doing well).
Naturally, a corporation cannot eradicate long standing social discrimination in one fell swoop, but it can make a difference, as these corporate giants are demonstrating. Another major ethical issue in regards to international business is the topic of bribery and corruption. American businesses have been found since 1977 by the Foreign Corrupt Practices Act, which made it a criminal offense for a US firm to bribe foreign officials (Doing well). However, foreign companies have not been similarly constrained.
According to (Vogl), in some countries, businesses were not only allowed to offer bribes but could actually take such bribes off their corporate taxes. Experts at the World Bank estimate that global corruption costs roughly $1 trillion per year (Vogl). This situation may soon change as the UN has formulated and signed a Convention against Corruption (Vogl). In time, the new UN Convention may become as influential as the UN Declaration of Human Rights (Vogl). What would you do” if you discovered that the company that you were working for bribed foreign officials to cover up the fact that company practices pollute the environment?
Would you “blow the whistle” on your employer. The Sarbanes-Oxley Act of 2002 in the US protects the rights of whistleblowers, and other countries, such as Australia, also have similar legislation (Trimmer). Furthermore, it is simply the right thing to do. Corporations should also take note that since the passage of this sort of legislation, which protects the rights of whistleblowers, the activity among employees is on the increase (Whistle blowing). Conclusion In this paper I indentified the importance of international ethical business practices.
With public scandals and corporate corruption, highlighting the need for ethical awareness and evaluation of behaviors carried out by the companies and its employees. Strategies such as code of conduct and training courses are developed by internal and external organizations to bring ethical awareness to organizations. I believe that all business, domestic and international should practice ethical standards because this is simply the right thing to do. However, I also agree with Friedman, in positioning profit as a company’s primary concern.
Nevertheless, business executives must realize that the world is becoming smaller. A global corporation can no longer assume that what it does in a country on the other side of the world will not become readily known to its shareholders. Non-governmental organizations (NGOs), environmental organizations (such as Greenpeace), as well as worker unions are societal watchdogs that are prepared to alert the world to unethical conduct, which seriously harms a business’s credibility and reputation.
Therefore, the ultimate argument in favor of business ethics lies in the fact that pursing ethical standards is profitable because they promote the reputation of a company and encourages worker satisfaction, which, in turn, promotes quality services and products.
Ball, McCulloch, Geringer, Minor, McNett. International Business. McGraw-Hill Irwin. 2008. Print. Berenbeim, R. Globalization drives ethics, New Zealand Management. (2000). Print. http://www. economist. com/node/304119 (Doing well) Reed, R.
New directions: biz must adjust its compass. Crain’s Chicago Business. . (1999). Print. Talbert, R. Do ethics matter/ Industrial Paint & Powder. (2003). Print. Zuckerman, M. B. Policing the corporate suites. U. S. News & World Report (January 19, 2004). Print Vogl, F. Taking corruption out of the global business levels the field for US companies. World Trade. (2004). Print. Trimmer, A. Whistle blowing: what it is and what it might mean for incorporated legal practices. Australasian Business Intelligence. (March 8, 2004). Print.