Growth of international business calls for the development of universal ethical standards

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"The growth of international business calls for the development of universal ethical standards. Corporate and national cultures embody differing codes of conduct. Serious ethical lapses have damaged organizations and societies. Various international groups of business leaders are developing voluntary ethical standards. Citizen activism maybe needed to ensure implementation and compliance with such standards." (Janice M. Beyer, David Nino)

More than often the headlines of the world business news, captions the competitiveness between the business corporations and the unethical actions of some of corporations. The foundation of the ethics and culture has been undermined due to the fact of struggling to reach the pinnacle or the unprecedented levels of economic competition.

When a Multinational Corporations invests in a foreign nation or when a manager travels to a foreign country for employment, it is vital to understand that culture, moral values and norms of that country.

Culture and its Impact on Organisations.

Hodgetts and Luthans say "culture is the acquired knowledge or the practice that people use to interpret experience the general social behaviour. This knowledge and practice will form values, create attitudes and influence behaviour:" (Hodgetts & Luthans, 1997)

The beliefs, the understanding levels, norms and the moral values vary from person to person, tribe to tribe, community to community and also nation to nation. Understanding and respecting the culture and the values of the others are the keys to be accepted by the others.

Culture of a society comprise of shared values, understandings, assumptions and goals that are learned from earlier generations, imposed by present members of a society, and passed on to succeeding generations. ((Deresky H., 2008)

When a manger attends a meeting, not knowing the culture of the counterpart might offend and make them un-easy. It is always a nice gesture to bow, when being introduced to Japanese. On the other hand, when greeting an Arabian, a kiss on both cheeks are their culture.

Today in globalised world, the working environment has become diversely employees with different genders, races, cultures, ethnic origins, and lifestyles. It is imminent for the leaders and supervisors to understand the cultural diversity and how it can affect the organization. By considering these, organizations take the necessary steps to assure a conflict-free environment for the benefit of the employees and the business.

KLM Royal Dutch Airline changed their travel-benefits policy to accommodate the all partners who are formally registered as living together, offering low fares for them. (Deresky H., 2008)


Richard L. Daft (2009, p.137) "The code of moral principles and values that governs the behaviour of a person or a group with respect to what is right or wrong."

The field of business ethics focuses on examining and promoting the conduct and policies within the context of commercial enterprise, both at the individual and the organizational level. The norms, in turn, are based on broadly accepted guidelines from religion, philosophy, professional organizations, and legal systems. The understanding on ethics and its values in different cultures are not the same. An action considered as ethical for one, might be unethical for the other.

In the corporate world and in the personal life, in some instances it is hard to draw the line between an ethical and unethical action. On the other hand, some, even major corporations; deliberately go way beyond the moral values and ethics to achieve competitive advantages.

International Business Ethics in Global Management.

Corporate activities, whether domestic or multinational in nature, involve stakeholders (e.g., investors, creditors, managers, employees, suppliers, customers, governments, and communities) that cut across national, political, religious, philosophical, and cultural barriers. At the same time, corporations that attempt to develop a code of ethics are faced with the difficulty of establishing common norms for their managers and employees to abide by.

The ethics, values and standards are usually characterised in three divisions, where the first is the codified law and then domain of free choice, and in between the two domains, come the area of ethics. (Daft R., L., 2009)

Domain of codified law - Values and standards that are written into the legal system and are enforceable in the courts. Eg: Court alleged that Enron executives broke the law by changing the financial reports to for their personal benefit.

Domain of free choice - The law does not have a say in this category. The managers have their freedom of choice in making the decision. Eg: A manufacturing company has freedom to decide on what their next product would be. Or, an individual's choice of a marriage partner or religion.

Domain of ethics - Although there are no law, the standard norms and principles and the values about the moral conduct guide the company or an individual. eg: Nestlé using palm oil from the destroyed Indonesian rainforests, pushing already endangered orangutans to the brink of extinction and accelerating climate change.

Figure 01

Today many business corporations give a preference to have their company policies and standards to be written clearly to avoid any misconceptions.

Universal Moral Vales.

The International Chamber of Commerce, the Organization for Economic Cooperation and Development, the International Labour Organisation and the UN bodies together contributes to the International code of conduct. (Deresky H., 2008)

International Labour Organization (ILO) has its International labour law for a normative character; that is, they prescribe standards of conduct. Unlike the International labour law, the corporate code of conduct which is also formed by the ILO is completely voluntary. The United Nations Human Rights Council which is an inter-governmental body within the UN system made up of 47 States to strengthen and promote and protect human rights around the globe. The council's major objective is to address the situations of human rights violations and make recommendations on them.

As according to the Mark S. Schwartz's Journal on Universal Moral Values for Corporate

Codes of Ethics, the global code of ethics that have been accepted by many companies, often lack adequately clear normative basis. Several have vouched on the importance of identifying universal moral norms. (Schwartz M., 2005)

Should managers of MNCs base their ethical standards on those of the host nation or the universal ethics.

With an ethnocentric approach, a company applies the morality used in its home country, regardless of the host country's system of ethics. In Ethical relativism it simply adopts the local moral code of whatever country in which it is operating. The moral universalism is the need for a moral standard that accepts all cultures. The moral universalism could be closest that we could have as the universal code of ethics at this moment. (Deresky H., 2008)

Figure 02

Conflicts arise from day-to-day business decisions and are influenced by factors such as culture and loyalty. In making a decision managers must question themselves, whom they are serving with their decisions: society, the corporation, their God, themselves, their family, or some other entity. Such tactics could help in making the right decision.

Usually the multinational corporations practice the centralised decision making system or decentralised decision making system. The corporations where the centralised decision making system is followed, the standards and the decisions are usually made by the home country. The decentralised decision making organisations usually let the managers at their subsidiaries to enforce their own policies. In such decentralised system, sometimes managers are forced to make a decision along with the local customs and standards or the home country policies or the international norms.

A manager working at a multinational corporation in a foreign country is forced to think twice before making a decision, so that it would not harm the local norms, culture and also the ethical standards of the home country or any other international code of ethics and policies. Neither one of the principles could be declare as the one nor neither could be could be ignored too.

Managers are confronted with making decisions about whether and to what extent they need to take these differences into account and to adapt their strategies accordingly (Fisher J., & Bonn I., 2007)

In the history of the corporate world, many international major corporations have had dealt with similar issues. Most multinational corporations prefer to abide the host nation's values and norms.

On 2006, a Dubai state owned company, DP World, was the leading bidder to the proposal, to administrate the terminal operations at six American ports. Although President George W. Bush initially backed the proposal, as UAE being a Muslim country concerns on security was alleviated n the U.S. Congress. The prime minister of U.A.E made the decision to pull out from the bidding process. It was clearly not a business decision made by the ruler of Dubai. The Dubai oil company made a huge decision to respect the United States government and their citizen's concerns (Deresky H., 2008)

Google made a decision to abide the Chinese government's demands to apply censor's blacklists to its search engine in China. Although the Google's founding principle is "Don't be evil" their business interests apparently clashed with their principles and some believed that Google has put their own freedoms at risk in China. The Chinese request conflicts with the universal norm of freedom of information and Google chose to go along with the Chinese request turning its back on the universal beliefs. (Deresky H., 2008)

To present a personal experience; even though in it is a common practice to send New Year greeting, the Australian High Commission in Sri Lanka maintains its home nation's high standards of moral values, by refusing to accept any sort of a gifts from its fellow embassies of offices.

There have been cases where multinational corporations being criticized for ignoring the universal ethical standards, for acting according to the local culture of some communities.

Most of these multinational corporations invest in Least Developing Nations who are below the poverty line where they could abuse the customs and etiquettes those communities for their own benefits. Nike and its unethical activities in Vietnam was a classic example.

The Brent Spar incident is a typical example of a problem that could arise when a multinational corporation ignores the universal ethical standards and values such as the protection of the environment.

Brent Spar, an obsolete oil-storage platform in the North Sea, was scheduled to be sunk by Shell's UK subsidiary. Shell UK had received the approval from the British Government to sink the Spar and, because it had met all legal requirements, was confident that sinking the Spar would pose no problems.

As it was ready to be sunk in to the sea on April 1995, groups of Greenpeace activists occupied the Spar, and argued that the low-level radioactive residues and toxins in the storage tanks would damage the environment. Shell forcibly removed the activists from the Spar and as it was covered by the media. Shell petrol stations were boycotted in Germany and many of the stations were vandalized.

Shell has a decentralized management system, and as the decision to sink the Spar was made the Shell UK, other subsidiaries of Shell were not involved in the decision making process. The repercussions of the decision made by the Shell UK were affected to the Shell Germany, who was never involved in the decision made to sink the Spar. Shell had large operations in Germany and Shell Germany should have been aware of potential problems from sinking the Spar, based on strong regional differences in environmental awareness and in particular the strong environmental movement in Germany. Particular due to the strong environmental movement in Germany, Shell Germany publicly criticized the Shell UK's decision and eventually the project was cancelled. (Fisher J., & Bonn I., 2007)

Moral responsibility is directed not only at judgments concerning right or wrong. Sometimes they are directed at determining whether a person or organization is morally responsible for having done something wrong. People are not always responsible for their wrongful or injurious act: moral responsibility is incurred only when a person knowingly and freely acts in an immoral way or fails to act in a moral way.

Having said that some of those multinational corporations who have been criticized for abusing the others and are guilty of doing wrongful acts, have tried to cover up their sins by doing some good will as corporate social responsibility.

Corporate Social Responsibilities (CSR).

Richard L. Daft (2009, p.147) defines Corporate Social Responsibility (CSR) as "Social Corporate Responsibility is defined as "Management's obligation to make choices and take actions that will contribute to the welfare and interests of society as well as organisation."

As different people have different opinion on which actions improve the social welfare and some argues that the increased concern to display CSRs has become to some extent a bandwagon. (Hurm, B. J., 2008)

Many multinational corporations run their CSR activities in their host country for the benefit of both parties. HSBC's generous assistance for the Sri Lankan Cultural Heritage Triangle was valued by the Sri Lankan government and the citizens of Sri Lanka. HSBC with the tag line "the world's local bank" managed to act locally in Sri Lanka and viewed by the public as a local bank.

On the other hand, some corporations use the CSR as a cover up for their bad image due to unethical acts.

Nike returned to its social and environmental practices after some years of unethical conducts. On the year 2003 and 2004 more than a quarter of Nike's South Asian factories were remarked for abusive treatments. Employees working for 60 hours per week and restriction of using the toilets and drinking water and so many other ill treatment were practiced. The NGO and the pressure groups pushed Nike to redefine its strategies and code of conduct. Today Nike carries out many CSR activities in Asia and other parts of the world. But some still believes that these actions of good will are to cover the healing wounds of the unethical actions carried out early 2000. (Deresky H., 2008)

Making the right decision.

What can start with a small bribe, or cover up (a matter of personal ethics), over time could lead to criminal actions. To avoid such situations and to guide themselves, managers need to question.

Is it legal?

Does it work in long term?

Can it be talked about?

Apart from these very useful self questions, the managers of multinational corporations need to;

Consult / analyse the laws of both countries.

If there is no clear answer, refer to the company's code of ethics.

If not, evaluate the rights of various stakeholders.

Follow the conscious and operate with integrity.


Manager must decide whether to base their ethical standards on those of the host country or those of the home country or go along with the universal ethical standards and whether these different standards could be reconciled.

Mangers should think twice before deciding to conform to local rules, culture, customs and etiquette, or decide to go along with the universal ethical standards. The ethical relativism, or the ethnocentric approach of the moral universalism, by going along with any of the above approach, a manager could keep both the host country and the home country satisfied would be a remarkable manager.

After all, respecting the human life, dignity and autonomy, and recognising the others as co-citizen of the world would show the right path.