A Strategic and Tactical Approach to Global Business Ethics, Second Edition

Lawrence A. Beer

• Publisher: Business Expert Press
• Year: 2015
• Print ISBN: 9781631570711
• eBook ISBN: 9781631570728
• Topic: Business
• Subtopic: International Business
• Index: Business

The inclusion of ethically driven elements into the strategic planning process of multinational corporations (MNCs) is an emerging consideration in the modern era of globalization. Firms pursuing cross-border activities in any capacity, and to whatever degree or scale, are increasingly coming into contact with differences in morally applied decision making that affects their operational success and sustainability. The choices made require the use of clear and unambiguous codes of conduct for embedded managers abroad. The implementation of a properly administered code, coupled with a program of corporate social responsibility (CSR), can add value to a company, while its misapplication or exclusion can diminish value.

CHAPTER 1

Ethics in Commerce

Ethics Defined

When I do good, I feel good; when I do bad, I feel bad. That’s my religion.

—Abraham Lincoln, American president

Ethics is a branch of moral philosophy. It is a set of principles to govern human conduct as practiced by a particular person as well as in concert with a specific society or culture group. It therefore includes institutions and organizations. Ethics within a commercial setting are reflective of rights or wrongs as defined by the business organization as it pursues its strategic objectives. The study of ethics is basically concerned with identifying, assessing, and selecting the appropriate values to be used as standards of judgment and then applying such determinations to achieve acceptable results. Ethical strategies are planned courses of action, a tactical decision making, that do not violate such principles and in fact promotes them. The book has a prime objective: to induce managers to incorporate an ethical imperative into the corporate strategic process and to provide guidance so this can be achieved. Such a process is especially relevant today, when global operations are coming into contact with more and more varying cultural and economic conditions. Applying ethics on a global scale involves a matrix of informed values applied to changing conditions; the result is ordered flexibility.

The Ethical Dilemma

With the increased expansion of firms operating across and between nations of the world, the modern globalization phenomenon, the definition of ethics takes on a broader horizon and a wider application. Therefore, the search for universal fundamental human rights values that all men can subscribe to becomes a more complex matter. Given the vast differences in social laws, cultural- and religious-influenced codes of conduct, and economic and environmental conditions, not everyone has a uniform mind-set as to the right course of action to be taken when a moral question arises. Conflicting values are always in play. This is the ethical dilemma: The need to choose from one or more acceptable courses of action, each one evaluated as viable. The choice is made more difficult when one choice prevents the selection of another. How can one properly evaluate two totally dissimilar potential paths—the fork in the road? Is it possible to clearly see both sides? This is a difficult exercise and the dilemma is best illustrated by a quote from F. Scott Fitzgerald: “The true test of a first-rate mind is the ability to hold two contradictory ideas at the same time.”

Embedded managers of multinational corporations (MNCs) in foreign markets are more often impacted by the ethical dilemma than their domestic or headquarters compatriots. Back home these executives are conducting their activities and therefore making ethical decisions in uniform national environments with prevailing acceptability. Managers abroad must increasingly look to their parent corporations for guidance and assistance on such matters. Too many times ethical decisions are made by default and not by intention. By initially recognizing that such issues will arise and that they will require an informed calculated response, and by incorporating an ethical component into the strategic planning process, the potential for a best-results scenario increases.

The Code-of-Conduct Debate

The decision by multinational firms as to whether or not to establish a code of conduct that utilizes some underlying moralistic or philosophical approaches to the subject and creates universally applied workable guidelines for their worldwide activities is one that companies are already making or will have to make in the future. Some scholars and global corporate chief executive officers (CEOs) feel that the subject is driven by an American or Western obsession with ethical conduct and that the global commercial community does not support the importance of the subject matter.

Still others see the topic as transient in nature. They note that the occasional public disclosure and dissemination of a case of questionable or inappropriate ethical behavior by a global commercial entity fuels public sentiment and promotes interest but is soon extinguished. Still others view the subject as one of the prime responsibilities of commercial entities and believe that determining its place in corporate decision making is a valid inquiry. It is against the backdrop of such different approaches within the era of modern globalization that the issue is approached. We start by examining the place of ethics in the global commercial world and show how the worldwide strategic planning process could be impacted by including ethics as an additional element to be considered. Its value and impact on companies are reviewed within the growing spectra of the public-interest imperative. As the social responsibility of companies closely parallels ethical conduct, although the issues are separate, an examination of how commercial entities impact the local human condition requires one to address these linked matters. While any company does provide an economic and therefore a quasi-social benefit to the community in which it operates, its activities do not always offer the publicly perceived value additions such as increased liberty, promotion of good health, and general welfare, nor do they target the absence of violent behavior inherent in good societies. The question therefore arises if in fact commercial entities are endowed with the moral challenges of ethically minded institutions. This crisscrossing of social responsibility and ethics, one driving the other or vice versa, requires both be considered in the text.

The competitive and financial consequences acting in unison as qualitative and quantitative drivers behind a firm’s decision to implement some form of ethical conduct are examined next. The initial efforts to construct international codes of commercial conduct are presented and an examination of their wording and definitions is offered. Moral philosophies are revisited to provide some additional guidance, along with specific references to religious teachings in regard to man’s obligations to his fellow men in order to present a wider underpinning and direction for incorporating ethics in the global function of managing a diversified workforce. However, an in-depth discussion of the philosophical frameworks of ethics and morality across all segments of a business is outside the scope of this limited investigation.

A comparison of the company codes of two firms, Nike Inc. and Gap Inc., is used to illustrate some practical approaches to the issues. A template for construction of a reasonable global code of conduct for multinational companies using the principles of absolutes and relatives to guide embedded international managers in the making of ethical decisions is presented to allow the reader to reflect on a practical approach. The text then summarizes charted avenues of global ethical decision making, a series of checks listing various optional routes international firms can choose to utilize. Absent from the book is an in-depth discussion of the accusations of lying and cheating leading to potential criminal and civil lawsuits targeting executives involved in false public reporting of their firms’ financial activities. We are mainly concerned with value creation for the company and the place of ethical conduct in its construction as practiced initially during the strategic planning process and later in its tactical implementation, which requires a clear and concise definition of its objectives. From a purely economic stance, the ethical question involves the evaluation of the efficient allocation of corporate resources to justify its place in a global moral ecology.

Social Responsibility

A man is truly ethical only when he obeys the compulsion to help all life which he is able to assist, and shrinks from hurting anything that lives.

—Albert Schweitzer, global humanitarian

This view of a commercial enterprise expands the jurisdiction of firms beyond their internal organization, their shareholders and employees, and asserts that a wider, more global circle of stakeholders and the worldwide communities they touch need to be considered, as well as the demands of the consuming market. This expanded arena is corporate social responsibility (CSR) and is a subject collateral to ethical decision making. While they share some common characteristics they are separate terms. Social responsibility is considered an ideological theory based on the concept that business institutions should not just function amorally (the ethical component) but should contribute to the general welfare and social improvement of the communities in which they operate. In simple terms, companies have a corresponding duty to the societies that utilize their products and services, a give-and-take scenario. Such responsibility, however, moves in two dissimilar directions, a duality of obligations. First, firms should not act in a negative or harmful fashion; they have a responsibility to refrain from doing anything that is damaging to the social environment around them—a resistance stance or sustainability factor. Second, firms must act responsively by instituting positive actions that promote improvement in the social environment around them—a proactive stance.

CSR may be the generic umbrella under which a code of conduct is constructed. CSR broadly directs us to care about the societal surroundings we operate within, but it does not provide specific directional choices in order to confront and assist in solving precise ethical dilemmas. The magazine Corporate Responsibility Officer publishes an annual list of the “100 Best Corporate Citizens” along the lines of Fortune magazine’s “Most Admired Companies” and “100 Best Companies to Work For.” Corporate Responsibility Officer uses a scoring system for publicly listed U.S. firms that was developed in 2000 by Marjorie Kelly, Samuel P. Graves, and Sandra Waddock. The system combines eight categories of stakeholder interest: shareholders, community, governance, diversity, employees, environment, human rights, and product. Such a diverse accounting criteria underscores the fact that social responsibility is not a simply defined term but a subject with many influencing determinants. Notable, however, is the absence of the term ethics or moral conduct in this applied analytical approach, as such judgments have a subjective component that is not easily qualified or quantified objectively. The subject of social responsibility is handled in a more in-depth examination later in the book, as it is an issue collateral to as well as embedded in ethics for the global business and global manager.

Roots of Globalization

In this world everything changes except good deed and bad: these follow you as the shadow follows the body.

—Unknown

As the reader begins to move into the various sections of the book, the question “why are these issues being raised today?” might arise. The initial process of globalization, according to researchers in anthropology, occurred during different periods when various societies and their commercial agents—first crown merchants, then entrepreneurial traders, and later companies—were commercializing their then known world. The ancient silk and spice trade routes crossing continents and stretching from England to China, first by land and then by sea, may have begotten the globalization of the world. Some would argue that the first true global era was inaugurated during the time that the British and other European nations set up their vast overseas empires, established colonies, and practiced mercantilism, and that the current period is an extension of this older process. Certainly multinationals have been around for some time. Moore and Lewis in their book Birth of the Multinationals examined the linkage of history and the world economy by tracing the development of transcontinental enterprises through the four great empires of the ancient world, Assyrian, Phoenician, Greek, and Roman. Such early motivation to trade across borders and promote foreign direct investment (FDI) was attributable to the desire to seek out natural resources to be used in the home market, to sell domestically made goods in new markets and to “rationalize a [then] global division of labor.”¹ All these historic incentives to globalize still induce modern firms to internationalize their operations and activities. Even the commonly accepted definition of a multinational enterprise, one that “engages in foreign direct investment (FDI) and owns or controls value-adding activities in more than one country”² is as apropos today as it was thousands of years ago.

As the ancient world grew, occupying a growing number of people involved in the commercial process both within and without their territorial boundaries, historians tell us that the business endeavor was not looked upon with favor. Early philosophers like Socrates, Aristotle, and Plato, commenting on the activities of their societies, dismissed “trade as petty and vulgar.” They “saw honest profit coming from farming or using natural resources.”³ Merchants were portrayed as those who greedily took advantage of others, cornering markets and accepting bribes with little concern for the welfare of the society. While the Europeans viewed the trading exercise with disdain, the Japanese regarded those who engaged in commerce at the bottom of the social ladder. Adding to their low positioning in Japan and their poor public image was the fact that traditionally local merchants collected royal taxes, skimmed off a profit, and sent the balance to national merchants, who presented the balance to the king. The resentment of the commercial process and its intrusion on society may have been rooted in such a consideration.

Commercial Ethical Behavior

The success of any great moral enterprise does not depend upon numbers.

—William Lloyd Garrison, American journalist and social reformer

Throughout history the commercial imperative has been labeled as a contributor to society’s ills and misfortunes. The contemptible practice of slavery, both the process of trading in human bondage and the ownership of forced labor, as noted earlier, had a commercial motivation. The rise of employees demanding their rights via unionism has been portrayed in both nonfiction al and fictional literature as good against evil. Wealth accumulation and the rise to power by the robber barons of commerce monopolizing and controlling not only the local factory town but also national and perhaps world industries are also depicted in emotionally charged, critical rhetoric by commentators of the day in history books. It is against this backdrop of historic distrust and greed inherent in the commercial process that the modern era of globalization has emerged. Is it any wonder that many of the opponents of globalization cite the immoral actions of today’s multinational firms, as they cross borders and take advantage of a more open world, as purveyors and beneficiaries of the destruction of environments and the rights of indigenous people? Historically, nations that grew to be commercially efficient battled internally with ethical issues, thereby erecting laws and regulations to reengineer their social climates to reflect their own codified moral imperative. Today, as these morally progressive countries engage developing markets via their MNCs, a conflict arises. Do such firms going abroad bring with them a packed-at-home suitcase of domestic laws and regulatory codes and press them on alien social environments, or do they wait for these improvements to be visited upon emerging regions in a more natural progression of time?

Proponents of globalization argue multinational firms that embrace an ethical program, whether by subscribing to a published code of responsible conduct or creating one themselves with real doctrinal direction, cushion the negative effects and become champions of more democratic freedoms in the lives they touch. They become ethical prophets. Opponents argue that this is ethical imperialism, a form of cultural orthodoxy and ethnocentrism, the colonization of the emerging world, that interlopers in an alien society have no right to impose their will on others. As invited visitors, they should accept the status quo and practice cultural relativism. They should allow developing societies to passively change when they themselves feel a new direction is warranted. It should not be forced on them as even good intentions can produce unforeseen consequences and possibly unravel social structures.

Questioning the ethical conduct and perhaps immoral activities of today’s large global enterprises is therefore nothing really new, except for the fact that in the modern era the wide public dissemination of such indiscretions and its potential influence on the buying decisions of global consumers has drawn such issues to perhaps a high level of importance. It is beginning to affect the bottom line of public corporations and therefore is impacting their strategic planning and everyday activities.

The idea of linking ethical behavior with commercial dealings can be traced back to transactions in ancient Egypt, where a code of conduct w...

Table of contents

• Cover
• Title
• Halftitle
• Copyright
• Abstract
• Contents
• Preface
• Executive Summary
• Chapter 1 Ethics in Commerce
• Chapter 2 Ethics and the Strategic Determination
• Chapter 3 Ethical Value Development
• Chapter 4 Ethics Unabridged
• Chapter 5 Time for a Change?
• Chapter 6 A Universal Code Template
• Chapter 7 Global Ethical Strategies and Conclusions
• Notes
• References
• Index
• Adpage
• Backcover