The rise of globalization since World War II has created moral dilemmas for businesses in five specific areas: labor standards, environmental standards, human rights, cultural diversity, and corruption.
The Rise of Globalization
Globalization, deregulation, and technological change supported the rapid expansion of multinational corporations (MNCs), which took advantage of regulatory arbitrage and relocated to low-tax jurisdictions and areas with loose labor and environment regulations. Overseas operations commonly meant the MNCs would operate in regions with subpar regulatory frameworks and lax enforcement mechanisms, creating opportunities for engaging in unethical behavior. Additionally, global value chains were structured in a way that made purchasing, sales, support, and product development more efficient.
The Moral Dilemmas of Globalization
A big moral dilemma concerns labor standards, something that cropped up due to overseas sweatshop outsourcing and concerns over poor overseas working conditions and child labor. Countries with poor environmental regulations may also have such conditions exacerbated by MNCs. Additionally, MNCs may face pressure to stop doing business with countries whose governments violate human rights. Another concern is a lack of respect for cultural diversity, despite international laws requiring respect be given to a country’s culture and customs. Finally, some countries allow bribery in foreign operations, creating another moral stress.
The Three Types of Ethics Codes
To govern their actions, companies may create ethics codes in various forms. In addition, they may choose to follow regulations set forth by industry organizations.
The Various Forms of Ethics Codes
Ethics codes manifest in various forms. There’s compliance certificates, which are documents requiring contractors, agents, or suppliers to agree with to comply with a company’s stated standards. Another form is purchase orders or letters of credit, which are written documents requiring compliance with a company’s policy on the part of the suppliers or other contractors. A third form, special documents, are written codes of conduct summarizing company guidelines, principles, or standards. Finally, companies can produce circulated letters, which are letters addressed to stakeholders stating company policies on a specific issue.
The Three Types of Global Corporate Codes of Conduct
The first type of global corporate code of conduct is the corporate-based code of conduct, which typically feature ethics training, whistle-blowing channels, and ethics reviews along with codes of conduct. These function by guiding corporate actions and helping the company differentiate itself from the competition. An example of this in action is Mattel, who allows a third party to post independent reviews of its practices on a public website.
A second type, industry-based corporate codes, includes codes of conduct, ethics programs, ethics offers, and ethics training. This type functions as a regulatory group that may offer independent monitoring and verification to ensure industry-wide compliance. An example of this is the Defense Industry Initiative on Business Ethics and Conduct, created by the U.S. defense industry to promote common interests through self-regulation.
The third type is global codes of international organizations, which typically include guidelines for multinational organizations like faith-based groups and nongovernmental organizations. The functionality varies depending on the issuing organization and if the code is created on a singular, industry, or global basis.
How and Why Leaders Should Model Ethical Behavior
Employees look to their leaders to model ethical behavior and provide guidance in areas of uncertainty. To serve that need, leaders must understand their responsibilities and have impeccable character.
The Seven Habits and Characteristics of Ethical Leaders
It’s important for an ethical leader to have a strong personal character, as a leader’s failure to earn their employees’ respect will create the perception that they don’t care about company ethics or ethics requirements. They must also act as role models for an organization’s value and act with transparency. It’s also important for ethical leaders to be proactive to prevent ethical problems. Additionally, ethical leaders must exhibit a passion for acting in the company’s best interest without bending the rules and considering all stakeholders’ interests. Finally, they need to view their firm’s ethical culture holistically.
The Duties of Every Ethical Leader
All ethical leaders must create a review process to identify ethical issues. They must also detect ethical risk areas by analyzing the company’s weakness. Additionally, they must be able to answer stakeholder concerns as soon as an ethical issue is revealed. Fourthly, they must avoid misconduct by ensuring all employees are trained to follow ethics guidelines. Finally, ethical leaders must recover from a misconduct disaster by addressing weaknesses in the company’s ethics program.
There are several potential benefits to deploying ethical leadership. These include building stronger company relationships with external stakeholders, building higher employee satisfaction and employee commitment, and seeing higher firm valuation on the stock market.
The Importance of Doing What’s Right
Though ethical behavior is not necessarily a legal requirement, companies and leaders who adhere to a strong code of ethics will not only enjoy better relationships with local communities but also serve as admirable examples.
Sources
Business Ethics, Part Four Implementing Business Ethics in a Global Community, Chapter 11: Ethical Leadership
InTechOpen, The Moral Dilemmas of Global Business
New York Times, Wal-Mart Hushed Up a Vast Mexican Bribery Case
ResearchGate, Global Codes of Conduct
TradeReady, Ethics and Your International Business – Where to Start
Why are many international business ethics issues different from domestic ethical issues? Because of differences in economic development, politics, legal system, and culture. It places local firms at a disadvantage and therefore it is illegal in many countries to include the United States.
What types of ethical issues might arise in the context of international business transactions What are some common examples?
Some of the most common ethical issues in international business include outsourcing, working standards and conditions, workplace diversity and equal opportunity, child labor, trust and integrity, supervisory oversight, human rights, religion, the political arena, the environment, bribery and corruption.
What are the ethical issues associated with multinational corporations?
Economic globalization and technological change are posing new ethical challenges to multinational corporations. As companies operate across diverse cultural and legal frameworks, moral dilemmas arise in labor standards, marketing practices, environment, corruption and human rights.
What is the most ethical way to do business internationally?
The most ethical way of doing business internationally is to become culturally sensitive. The companies have to adopt to the culture of host country so as to cater to the specific needs of local customers. They should not try to impose the culture of their home country in the host country market.
What are the social and ethical issues a company should consider when entering a foreign market?
However, doing business in other countries presents US companies with ethical issues to face before opening a foreign operation.
- Outsourcing Production Jobs.
- Working Conditions and Standards.
- Bribery and Corruption.
- Gifts and Favors.
- Human Rights Issues.
- The Role of Religion.
- The Impact on the Environment.
What is the implication of ethics in international businesses?
Secondly, ethics is important in international business as it establishes a healthy and pleasant relationship for all parties involved. Thirdly, performing in harmony with ethics is vital for attaining client’s attention and support and achieving a significant competitive advantage in a particular market segment.
What is ethical consideration in business?
Ethics are about having standards of behaviour and ‘doing the right thing’. This means that an ethical business will act in a socially responsible way, doing what is right even if it is not required to do so by legislation , and regardless of the impact it might have on profits.
What are examples of ethical considerations?
Ethical considerations during evaluation include:
- Informed consent.
- Voluntary participation.
- Do no harm.
- Confidentiality.
- Anonymity.
- Only assess relevant components.
What is an ethical consideration?
The way that individuals are affected by the conduct of others merits ethical consideration. The risk of harm to that person becomes an essential ethical consideration in deciding what information to disclose and how to disclose it.
What is the importance of ethics in Counselling?
Ethics including ethical codes and principles aim to balance the power and ensure that the counsellor operates for the good of the client and not for self. Primarily, counsellors’ duty of care is to their clients.
What is the important of professional ethics?
Professional ethics are important for several reasons. First, most professionals have an informational advantage over those they serve. Professional ethics will provide the useful function of identifying these moral hazards and providing the appropriate avoidance or work-around strategies.
How does unethical people impact our society?
Unethical behaviour has serious consequences for both individuals and organizations. You can lose your job and reputation, organizations can lose their credibility, general morale and productivity can decline, or the behaviour can result in significant fines and/or financial loss.