Business ethics is ultimately for a better life, and is the application of ethical values to business behaviour. Ethics is about values and analysing behaviours as being acceptable or inappropriate. Human activity itself can cause business problems, ethical people do what they believe is the right thing to do. It will be impossible to address all ethical issues in international business expansion nevertheless; I will be covering the fundamental ethical issues:
‘ Culture
‘ Diversity
‘ Company Behaviour and decision-making
‘ Corporate Governance and compliance
‘ The Ethics of Corporate Social Responsibility
‘ Exploitation
‘ Working Conditions
‘ Brand Reputation and Ethical Shareholding
‘ Ethical Tourism
More organisations are paying attention to ethical values and programs because of the increased focus on globalisation
Culture
‘In every culture in the world such phenomena as authority, bureaucracy, creativity, good fellowship, verification, and accountability are experienced in different ways.’ (F. Trompenaar, 2012)
Balance between consistency and adaptation is essential for corporate success. Consequently, the need for standardization in organisation design, systems and procedures increases as markets globalize. There is pressure to adapt to local characteristics of the market, the legislation, the fiscal regime, the socio-political system, and the cultural system.
Culture is a shared system of meanings therefore, in overseas areas it is possible for multinational companies to apply some formulas derived from their own culture:
‘There are ways of adapting to external influences that can prove economically effective. To accept direction from customers, market forces, or new technologies can be more advantageous than opposing these influences with your own preferences.’ (F. Trompenaar, 2012)
Geert Hofstede suggests national culture as a key factor shaping organisational culture next to factors such as the type of technology in use. The research of Hofstede has shown that practices are more tangible than values.
There are a number of issues that may impact the product and service provided, these are:
‘ Inclusion and diversity.
‘ The International Diversity 1995 (global cultural diversity conference proceedings)
‘ Glass Ceiling and Political Correctness.
‘ Reputation which is critical in a competitive market.
Diversity
Awareness and the application of the ‘Equality’ and ‘Diversity’ laws are vital for any business who value people and performance. Business also have to maintain their reputation wherever they operate (most businesses need a ‘licence to operate’), they must consider those involved in the processes and those that are influenced by the decision making. Operating with integrity is then the key part of sustainable success for any business.
Ethical behaviour influences internal and external decisions of a business, considering in context both, equality and diversity is very much pervasive. More knowledge and confidence relating to individual rights and career development requires employees to have a greater knowledge. Equality is treating people fairly, with dignity and respect. Diversity is also about accepting people’s beliefs, values and is a source of creativity.
(glassvisage, 2014)
Diversity creates a strong employee base, a connection to customer base and a ‘Democratic Society’. Rights and responsibilities are needed to add value to the bottom line in diverse global management. Employee diversity from a HR perspective helps towards achieving the goal of organisational effectives.
Behaviours and beliefs continue to influence and set communication boundaries between individuals and working groups, standards of performance and professionalism in various roles and group functions. Leaders have the responsibility to lead and support others in development areas, goal setting is important, delegation, feedback and rewards. Leaders must be a role model and radical in challenging the status quo, managing people means adapting to change rapidly and understanding the needs of individuals through relationship building and performance analysis and regular reviews in line with business needs to exceed expectations.
Leadership and innovation, decision making is fundamental to leadership and the essence of change management.
‘First define reality then give hope.’
Napoleon’s definition of leadership
Company Behaviour
Discrepancies in status and power, is likely to exist due to gender and ethnic differences in leadership (Bartol, 1978; Kanter, 1977). The glass ceiling issue has been associated with barriers to upward mobility for women and possibly ethnic minorities Morrison and Von Glinow (1990).
‘Female minority managers may face what has been termed a ‘double bind’ due to their combination of female gender and minority status, which may influence choice of leader behaviours or subordinates acceptance of them.’ (Ferdman, 1999)
One key upward mobility effort is to understand and show the ability to engage in leadership behaviours to make best of organisational resources, benefit from diversity and eliminate ‘glass ceilings’ a term used to describe barriers preventing women and minorities from advancing to the various management positions in corporations and organisations.
‘Once you have developed an ethical mind, you become more like an impartial spectator of the team, the organization, the citizenry, the world.’ (Harvard Business Review, March 2007)
By conducting business and inducing all employees to encourage ethical thinking, the business has more chance of gaining a competitive advantage over its competitors. Increasing productivity and improving to high quality standards through ethical practices will bring value to everyone including the customers and stakeholders. Ethical practices will also justify development opportunities:
‘It is enough to espouse high standards. To live up to them-and help others to do the same-requires an ethical cast of mind that lets you practice your principles consistently.’ (Harvard Business Review, March 2007)
Whistle-blowing is a good example of displaying ethical minds. A whistle-blower’s broader mission is to do what is right even if it be at the cost of losing the respect of their managers and ultimately their job.
The Lewis model
The Lewis Model classifies cultures into three categories:
1. linear-active
2. multi-active
3. reactive
The most successful international leader will be an amalgamation of all variations of culture. By modifying their leadership styles for different cultures, successful international managers are style variation mediators and prove good mediation with teams.
(Challenge.Gov & Sewlyn, 2012)
Corporate culture is based on the corporations own cultural programming, shaped by its leaders and employees and not just the markets and technologies. Processes and procedures are there to set the boundaries and will justify decisions made, how decisions are mapped out and implemented again is impacted by the culture in which they operate. Structures and processes are influenced by culture, and organisational cultures should mirror national cultures and open up the doors to business internationally.
Retaining profit is difficult therefore management have the right to run a business how they feel best fits. Financial gain and increased net profit, the bigger the opportunity is to expand to more desirable locations, where resources and consumers are more abundant.
For a company to consider and implement ethical values all shareholders need reassurance, loyalty, trust and respect and to be taken care of by the company. This is an increasing demand from the public that companies must take care of employees, communities and the environment in which they operate. The internal advantage of this approach is the opportunity for organizations to harness the innovation and creativity of their workforces in a fair and consistent way.
Corporate Governance
Employment laws will change when a business expands into the international market, dependent on the culture processes will also need changing, how great the change is dependent on national culture and societal norms, these knowledge gaps must be understood and closed. Communication and perception of an organization to its community and external environment can affect business success. It is imperative to protect the brand reputation and exposure of information; this is how Human Resources regulations support business functions to ensure the right people are involved in the right discussions. It is important to encourage effective communication which will bring about new opportunities to improve products and services. Generating profits will allow the business to spend more on research and development, marketing initiatives if required to understand the global needs and wants of customers. Operating business in a foreign country is a big challenge, reputational risks need to be identified in order for the business to maximise profits and consider enhancing the nature of its services in a new playing field. To gain a competitive advantage may mean investing in new technology to become a key player in the market.
(Fallon, 2014)
The Ethics of Corporate Social Responsibility
Corporate social responsibility covers many ethical situations highlighting issues that will improve conditions for both the public and private, and also impacting the business itself and where it operates. Sustainability is vital for business success Businesses are faced with challenges when expanding business overseas, as global problems such as persistent poverty, healthcare, and climate change is still very much a crisis. Embedding corporate social responsibility into your business operations will create shared value for both the business and society.
Exploitation
Wal-Mart ethics policy is clearly outlined in their statement, the introductory content includes:
‘ Who Is Covered
‘ What Laws Applies
‘ Responsibilities
‘ Discipline for violation
Wal-Mart’s statement also includes supporting material on internal and external actions as follows:
‘ Raising concerns and speaking up.
‘ Leading with integrity in the workplace.
‘ Leading with integrity in their communities.
This has not prevented controversy and the leaking out of information of whistle-blowers who have reported unethical appearances during business practices. Wal-Mart’s code of ethics seems not to extend to giving employees a voice to express disagreement or displeasure regarding treating all workers with upmost respect.
Since moving across the US border in 1991 Wal-Mart has pursued globalisation aggressively. Wal-Marts annual statement 2014 shows Wal-Mart International alone has achieved net sales of $13,513 million and continues to grow. Accrued wages and benefits in 2014 is $4,652m a decrease of $407m since 2013.
‘This hard driving need for growth through expansion impels managers to take short-cuts that run counter to the company’s ethical and cultural norms. It tempts managers to engage in potentially illegal and unethical actions.’ (S, Prakash, 2014)
Wal-Mart has been embroiled in incidents of public scandals in foreign countries, with reference to the exploitation of workers, most notably in Bangladesh, where low-skill, low wages predominate. Multinational companies have been accused of profiting from the sweatshop-like exploitation of workers. This is equivalent to human rights abuses, although economic sanctions and aid is currently prevalent, such corporations such as the International Finance Corporation (IFC) should be equally willing to help and fight anti-competitive exploitation of workers.
Working Conditions
Primark is well known to sell cheap clothing at the budget end of the market. Primark were investigated, to understand where and how these clothes were sourced. Primark were exposed to having features of child labour present in third world countries (considered the worst unethical of practices) to deliver fast fashion at rock bottom prices.
Brand Reputation and Ethical Shareholding
Low wages and unsafe working conditions, these workers endured hardships, forced to live in shocking accommodation. A breach in ethical protocol Primark has suffered from adversity on its reputation, as accused of unethical and inhumane practices. Primark has now implemented an Ethics Director to conduct audits and has renewed its vision statement:
‘As an international brand with a global supply chain we have the responsibility to act ethically. We embrace this responsibility as an opportunity to be a great force for good.’
Within the proceedings of business operations, practices and processes transparency is important. For example, how the business manages its relationships with suppliers and the supplier’s practices. Regardless of the cost operating in the ‘right way’ is not just ethical it is also good business practice.
I believe it is ethically wrong to buy shares in a company who are seen to be behaving badly unless the company show ample effort to address and prevent misbehaviour beyond their legal duties. An example, arms trading is arguably an ethical business creating a huge numbers of jobs and advancing technology for business in home countries.
Ethical Tourism
(Small Business Trends, 2014)
Fair trading can be described as a corporate ethical code and/or trade partnership agreement. One aspect of ethical and sustainable tourism is prioritising groups who are ready to engage with national/international markets but have no organisational support neither the technology.
Tourism from many perspectives is a mixed blessing representing the superficial form of intercultural encounter. Tourists learn new languages to promote their businesses internationally as well as learn the history of those particular countries. Developing friendships opens up the doors to the possibility of business expansion overseas.
The Scandinavian Centre in London
Support found for the proposed link between perceived ethical obligation and CSR engagement. In this case Corporate Social Responsibility is the tourism certification programs, hypothesized in a decision situation, that managers will consider CSR issues having an ethical dimension.
The ethical dimension of tourism certification program journal focuses on Scandinavian managers in the hospitality industry and SMEs and the processes towards certification programs. Eco-labelling and certifications are increasingly gaining popularity linked to the popular view of Scandinavia and its ‘green’ image. It is in the long term interest of the hospitality business to ensure environmental sustainability of the tourist activity. There is however, a growing demand for businesses to focus on CSR from a social perspective i.e. employee wellbeing (Mensah, 2013; Bohdanowicz et al., 2011).
There are now public policies providing in depth knowledge on how ethical obligation influences the decision-making process.
Conclusion
A business will succeed by researching target markets to identify any possibility of foul play, corruption, pollution and any human rights abuses. In reality organisations will encounter resistance from uniform business practices and procedures, therefore ethical decision-making will ultimately improve customer and supplier relationships. The laws and ethical frameworks will differ in other countries, understanding the difference is imperative.
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