How do they impact you as an individual investor, business manager, or company manager?
International business is an exciting concept, but one of the first things to understand is that while there are principles and rules which apply to domestic business. International business is much more dynamic and requires different tools and strategies.
Without knowing these tools and techniques, it is straightforward to make mistakes and have devastating effects on your business’s reputation globally and internationally.
The fundamental issue of international business ethics
- The first fundamental issue of international business ethics is that many different cultures and countries hold entirely different moral and legal principles.
In America, business norms can be used to leverage economic power, which can sometimes have unfortunate consequences.
For example, suppose you were an American company, and you did something that might be considered immoral by the laws of your own country but were not illegal by those of other countries.
In that case, you might find that your reputation and your business’s value could be severely damaged in a concise time frame. Therefore, it is essential to understand that when dealing with cultural differences, the first rule of thumb is to use personal judgment and apply personal ethics based on your values and convictions.
- The second fundamental is always to remember that when you are speaking or acting in terms of your companies’ interest, you must do so from your ethical values and convictions, never from the perspective of what is suitable for someone else.
Everyone has different human rights, and you must consider your moral principles and the countries where your business conduct occurs. And that is why you must understand and recognize when you are participating in morally wrong activities, irrespective of whether you are aware of it or not.
For example, suppose you are a company that owns casinos. In that case, it is morally wrong for you to support any political movement that would limit the freedom of the individuals who visit these casinos.
It is also essential to recognize that human beings are not always identical. When it comes to cultures, there can be tremendous cultural differences and attitudes towards people, which can very well affect your conduct as a business professional. It is not uncommon for some companies to engage in activities considered discriminatory or perhaps even sexist.
There are many examples of when this has caused significant damage to companies and their reputation. Therefore, companies must make sure that they know and understand the different components of human cultures and how they can affect their conduct and professionalism.
Many companies have successfully addressed the problems of cultural relativism, and many still do so to a great extent. However, some small businesses are unable to do so because they are not as big as other businesses, and therefore cultural relativism is not such a big issue.
It may not be the case for large multinational companies doing their best to conform to the different international business ethics codes. Small local businesses and even family-owned businesses may fall short because of cultural issues.
International business ethics
International business ethics have been formulated and developed to ensure that businesses and companies do not engage in activities that would cause them to violate the various codes and principles.
- One area that is being discussed now is cultural relativism and its effects on the different international business standards.
- Most countries and cultures have other points of view towards what is acceptable and what is not.
In some instances, these can cause conflicts between countries, leading to negative consequences on both sides.
When these conflicts arise, it becomes necessary for the United States and other countries to develop rules and traditions for businesses to follow.
- The above-cited ethical code, “No business should be doing business with any government which does not meet its basic rights and responsibilities”.
- It is the core of international business ethics, and it was first formulated back in the year 1920 during the height of the Great Depression.
- Cultural ethics has been evolving and changing over time, but the basic principle has not changed. These rules apply irrespective of the kind of country you are dealing with, and they are universal.
- The only aspect that needs to be taken into consideration while dealing with countries that do not practice ethical business is the extent to which the country’s particular culture is compatible with the business needs of the managers.
- It can be checked by observing how the managers interact and by following their professional careers, which reveal much about the social norms prevalent in the country.
What is ethical behaviour?
The subject of ethics is an interesting one. In a simple sense, ethical behaviour is a code that humans follow.
- It is a standard against which individuals or groups act and answer when working on their moral principles.
- It is often a strict standard to live by, as it requires the renunciation of many human rights and the admission of guilt.
Unfortunately, it is not always easy to talk about ethical issues.
How can we discuss something as seemingly complicated and varied as cultural ethics and business practices when we don’t fully understand it?
The truth of the matter is that there are no easy answers here – there are only facts. No matter how difficult it may seem to address such ethical issues as those involving human rights and the freedom of expression, businesses must conduct business overseas in a way that upholds these values.
Otherwise, there will be no reason for doing business at all!
Ethical issues in international business range from the type of employees one hires to goods one purchases from other countries.
The business of outsourcing is growing in considerable measure.
There are ethical issues regarding taxation, patents and trade.
- The business of outsourcing is growing in considerable measure due to the low labour costs in developing countries, where workers are incredibly cheap compared to the cost of living in Western nations.
However, it is also important to note that outsourcing has come under fire recently due to using slave labour in third world countries to build construction projects for Western companies.
- In addition, there are concerns about outsourcing taking away jobs from residents in developed nations and increasing inequality in wealth.
What are some of the fundamental ethical issues of international business laws and business practices that businesses must consider when engaging in global trade?
First, one has to take into account cultural differences. Cultures are often quite different worldwide, especially in terms of language, social mores, attitudes and expectations.
Language barrier as a critical problem
The language barrier is often a significant issue when hiring people to work abroad. Companies have to make sure they hire employees who speak English fluently and can work in various cultures.
Another point of consideration is social responsibility.
How does an organization or a business define its social responsibility? Do they believe in providing services that help the local people?
Do they respect local traditions, cultures and beliefs?
These are just some of the questions that must be answered by businesses operating globally. If not, then the practices of social responsibility to the environment could be jeopardized, as would the companies’ reputations at large.
- Global business ethics and practices, then, also need to consider the legal aspects of incorporating a country into the host country’s economy.
- Many nations have special measures or legislation on this, and multinationals must consult with lawyers on how to legally incorporate their business in host countries.
Another primary concern is intellectual property rights or patents, protection and enforcement of patents around the world.
It can be a susceptible area for multinationals based in Europe because they must protect their intellectual property from foreign companies that might want to use them illegally.
Again, companies need to remember that every country has its legal system and its patent policies and practices.
One of the most critical ethical issues of international business is the use of sweatshops.
For years, the issue of sweatshops and low wages have been debated around the world. But what is much less talked about is the use of slave labor in China and other Asian countries, which are the primary source of cheap labor for Western multinationals.
Reports, such as the UN report on slave labor, recommend strongly against investments in developing countries with slave labor problems. Still, many of these companies ignore this fact, even making their factories there.
For this reason, multinationals need to ensure that they are aware of the ethical and social standards regarding slavery and make their factories in locations that do not employ people in forced labor conditions.
The different cultures that people bring with them when they work internationally are another major issue in terms of ethical conduct. Most companies want to market themselves globally, so they hire people from cultures that may be at odds with their own moral and cultural foundations.
It is up to multinationals to research and develop policies and programs that will not negatively affect their foreign clients. This research needs to include not just different cultures but also an understanding of the practices of the people in those cultures.
For example, it may be a good idea to hire people from a different culture but have the same values as your own, if you can show that your company does not abuse the importance of the people you are interviewing.