Ethics and Social Responsibility in International Business

CHAPTER 5

ETHICS AND SOCIAL RESPONSIBILITY IN INTERNATIONAL BUSINESS

NATURE OF ETHICS AND SOCIAL RESPONSIBILITY IN INTERNATIONAL BUSINESS

Ethics is an individual's personal beliefs about whether a decision, behavior, or action is right or wrong. Ethical behavior usually refers to behavior that conforms to generally accept social norms. Unethical behavior describes behavior that does not conform to generally accept social norms. The formation of ethics within an individual comes from a combination of factors which include early childhood experience from parents, peers, religion and personal values.

In society, ethics (social norms) of its members are formed by adopting formal laws which must be followed. Thus the generalizations of ethics can be extended to these understandings:

• Individuals have their own personal belief systems which establishes ethical and unethical behavior.
• Common cultural understanding of norms usually lead to similar views on ethical and unethical behavior.
• Individuals are able to rationalize behavior based on circumstances such as situation which events occurred in.
• Individuals may deviate from their own belief systems based on different circumstances.
• National cultures, customs and traditions can strongly affect ethical values ethical values within a country. Values are the things a person feels to be important.
• Ethics can be viewed differently by individuals even though they are in the same culture.

ETHICS IN CROSS-CULTURAL AND INTERNATIONAL CONTEXTS

Ethical behaviors are discussed in the context of how organizations treat their employees, how employees treat their organizations, and how employees and their organizations treat other economic agents.

• How an Organization Treats Its Employees

Hiring and firing

In some countries, ethical and legal guidelines suggest that hiring and firing decisions should be based solely on an individual’s competency to perform the job. In other countries, it is perfectly legitimate to give preference to some individuals based on age, gender, ethnicity, or other factors.

Wages and working conditions.

The establishment of appropriate working conditions and wages differs from each countries. Protection of employee privacy rights, for example, may vary widely.

• How Employees Treat the Organization 

Conflicts of interest

A conflict of interest occurs when a decision potentially benefits the individual to the possible disadvantage of the organizations. For example, in some cultures, giving and receiving gifts from external bodies might be unacceptable while other might see it as acceptable.

Secrecy and confidentiality.

In many cultures, there are laws restricting the disclosure of sensitive information by a firm’s employee to competitors. Ex: China has allowed a law where a contract clause of not allowing an employee to work for a competitor for a period of time.

• How Employees and the Organization Treat Other Economic Agents

Bribery, pricing, financial disclosure, and advertising practices are all areas where practices vary from one culture to another. In all these instances, managers may be confronted with accusations of unethical behavior.

MANAGING ETHICAL BEHAVIOR ACROSS BORDERS

Even though ethics reside in individuals, many companies try to manage the ethical behavior of their employees by clearly specifying what the company considers to be ethical or unethical. This clear specification often takes the form of ethical guidelines or codes, ethics training, organizational practices, and/or corporate culture. 

Guidelines and Codes of Ethics

Codes of ethics are written guidelines detailing how employees are supposed to treat suppliers, customers, competitors, and other stakeholders. A multinational must make a decision as to whether to establish one overarching code for all of its units around the globe, or whether it should tailor each code to its local context.

Ethics Training

Given that it is probably impossible to anticipate all potential ethical dilemmas and cover them in one set of laws, some multinational corporations address ethical issues proactively. By offering employees training on how to cope with ethical dilemmas, many firms hope each member of the organization might decrease any ambiguity. For expatriates in particular, it is important that they receive some training in the business practices and values of the culture where they are stationed.

Organizational Practices and the Corporate Culture ·

Organizational practices and corporate culture contribute to establishing the ethical climate of the firm. Top leaders or higher management must be an example to follow in order for the rest of the organizations to quickly understand the expectations or standards for their own behavior. In particular countries, bribery is practically a way of life. Organizations need to be very clear about their practices in such environments if they wish their employees to adhere to company standards instead of local standards.

SOCIAL RESPONSIBILITY IN CROSS-CULTURAL AND INTERNATIONAL CONTEXT

Ethics in business relate to individual managers and other employees and their decisions and behavior. Because ethics are usually don’t apply in some organizations yet still relate in their environment nonetheless, ethical dilemmas happen really often, and it usually relates to something called as social responsibility or the set of obligations an organization undertakes to protect and enhance the society in which it functions. The complexities of social responsibility for international businesses is in how they balance the ideal of global stance on social responsibility against the local conditions where it does the business.

AREAS OF SOCIAL REPONSIBILITY

• Organizational Stakeholders

Concentrates on how to treat the customers fairly and honestly, treating their workers fairly and respecting the dignity and needs, protecting investor rights by following the right accounting procedures; provide appropriate information, and manage the organization.

• The Natural Environment

Relates to the natural environment such as regulations about the disposal of waste and general treatment to the environment. Companies may need to develop economically feasible ways to reduce natural phenomenon, or creating alternative methods.