Ethics in International Business

ETHICS IN INTERNATIONAL BUSINESS

Business Ethics:

Business ethics are principles of right or wrong governing the conduct of business people. The text says, “The accepted principles of right and wrong” But there are many differences of opinion among highly ethical business people.

Ethical Issues in International Business

Many ethical issues and dilemmas are rooted in differences in political systems, law, economic development, and culture. Some key ethical issues in international business

Employment Practices

When work conditions in a host nation are clearly inferior to those in a multinational’s

home nation, what standards should be applied? How much divergence is acceptable?

Determinants of Ethical Behavior:

Organization culture Personal ethics

Decision making processes Leadership

Unrealistic / realistic performance goals

The Roots of Unethical Behavior:

Ethical Decision Making

Five things that an international business and its managers can do to make sure ethical issues are considered

–  Favor hiring and promoting people with a well-grounded sense of personal ethics

–  Build an organizational culture that places a high value on ethical behavior

– Make sure that leaders within the business not only articulate the rhetoric of ethical behavior, but also act in a manner that is consistent with that rhetoric

– Implement decision-making processes that require people to consider the ethical dimension of business decisions

–  Develop moral courage

What is culture?

“A system of values and norms that are shared among a group of people and that when taken together constitute a design for living.”

Different components of culture:

Values: Abstract ideas/assumptions about what a group believes to be good, right and desirable

Norms: social rules and guidelines that prescribe appropriate behavior in particular situations

Folkways: Routine conventions of everyday life.

o  Little moral significance

     Generally, social conventions such as dress codes, social manners, and neighborly behavior

Mores: Norms central to the functioning of society and its social life

     Greater significance than folkways

o  Violation can bring serious retribution, Theft, adultery, incest and cannibalism

Determinants of culture

Improving Global Business Ethics

Seven Moral Guidelines for MNCs

Inflict no intentional or direct harm

Produce more good than bad for the host country Contribute to host country’s development

Respect the human rights of their employees Pay their fair share of taxes

Respect local cultural beliefs that do not violate moral norms

Cooperate with the government to develop and enforce background institutions

The Role of Ethics in International Business

International business ethics has a number of open questions and dilemmas. Today it is characterized by the following elements: Every culture and nation has its own values, history, customs and traditions, thus it has developed own ethical values and understanding of ethical principles; There is no international ethical code of conduct, accepted and followed by all the countries; There is a lack of governments’ initiative to create ethical cooperation framework and thus to enhance ethical behavior in international business; It is hard to outline those ethical values which would be understandable, acceptable and important for representatives of all the continents simultaneously within different types of international cooperation projects.

Following approach to international business ethics:

Every individual and every corporate body must outline its ethical values; Every individual and company should ensure understanding of ethical values and belief in their effectiveness and importance;

Employees of every organization must participate in creating a corporate code of conduct, which in this case definitely represents corporate culture, rather than only personal views of a company’s leader; Every individual and company must monitor compliance with the outlined values at all times.

All the ethical values must be divided in two categories – rigid and flexible. Rigid are those values which cannot be renounced under any circumstances (honesty, integrity, professionalism), and flexible ones, which are those moral principles which may be interpreted in different ways in different situations (will to understand other cultures’ values, remuneration policies).