Ethics in International Business

Ethics in International Business

The importance of international business ethics has been rising steadily along with the growth of international business. Technologies like the Internet have made international business all the more viable, and many companies can only find the desirable growth and profit they seek by expanding into new markets. This means that just as business ethics domestically have grown in importance along with the power and significance of major businesses, so must international business ethics take center stage as a major concern of the modern era.

Arise when a manager makes decisions consistent with differing national environments:

Political systems
Legal systems
Economic development levels
Culture

What is ethical and “normal” in one environment may not be so in another. Arise most often in the context of:

Employment practices
Human rights
Environmental policy
Corruption
An MNC’s perceived moral obligations to society.

The primary problem of international business ethics lies in the fact that most cultures and nations hold entirely different standards of both law and ethics. One of the biggest problems facing any international business code of ethics is that standards for employment practices are not constant between nations participating in international business. An unethical practice that might be banned in a developed country might then be perfectly legal in a different, less developed country, allowing an international company to then set up its own division in the less developed country in order to take advantage of the legality of such profitable, yet unethical, employment practices.

Should the MNC adapt its policies? Standardize?

Hiring practices, labor relations, diversity issues, employment conditions are some specific issues that require careful thought.

A manager can assume as universal her/his views on freedom of:

Association
Speech
Assembly
Movement
Political repression

What is the responsibility of an MNC to uphold different standards of human rights?

Environmental Policies

Locally mandated environmental standards may be inferior to those an MNC knows it can achieve
Tragedy of the commons: a resource held in common by all, but owned by no one, is overused by some, resulting in degradation.
If a decision is legal but unethical, should it be taken?

Corruption

Our modern understanding of business ethics notes that following culturally accepted norms is not always the ethical choice. What may be acceptable at certain points in history, such as racism or sexism, became unacceptable with the further development of society’s mind-set. What happens when cultures change but business practices don’t? Does that behavior become unethical, and is the person engaged in the behavior unethical? In some cultures, there may be conflicts with global business practices, such as in the area of gift giving, which has evolved into bribery—a form of corruption. Government officials may ask for bribes for an MNC to “get things done”

Is an MNC’s manager who agrees a corrupt manager?
Should an MNC ever accede to bribery demands?

Foreign corrupt practices act (USA)

Convention on Combating Bribery of Foreign Officials in International Business Transactions (OECD)

MNC and Social Responsibility

Corporate social responsibility (CSR) is defined in Wikipedia as “the corporate conscience, citizenship, social performance, or sustainable responsible business, and is a form of corporate self-regulation integrated into a business model. CSR policy functions as a built-in, self-regulating mechanism whereby business monitors and ensures its active compliance with the spirit of the law, ethical standards, and international norms.” Social responsibility: business decisions should be made after consideration of social consequences of economic actions

Noblesse oblige: honorable and benevolent behavior is the responsibility of those in power
Benevolent behavior responsibility of only successful business?

Determinants of Ethical Behavior