Ethical Issues Are Imperative to the Success of International Businesses - Coursework Example

Running Head: INTERNATIONAL BUSINESS ETHICS International business ethics Name Course Instructor Date INTERNATIONAL BUSINESS ETHICS Ethics in international business is superlatively important. These ethical issues are rooted on the fact that economics, laws, cultures and political systems vary from one country to another. In addition, new issue and trends arising everyday are creating a constant need for proper ethical behavior within business organizations. This is a preventative measure against possible lawsuits that have faced several multinational companies in the past. These events are direct results of public scandals caused by misleading practices and corporate malfeasance and they have detrimental effects towards the image of an organization. Tremendous expansion of businesses into the global market and the recent fall of worldwide trade barriers are factors that have further underscored interest in the areas of social responsibility and ethical behavior (Gangone, 2010). As multinational organizations enter foreign markets and expand globally, ethical conduct of their employees should be an essential consideration since such expansion comes along with cultural diversity which may undermine expected results if not properly handled. According to Jennings (2012), concerns about inappropriate ethical behavior of corporations in foreign countries are usually manifested in legislations such as the Sarbane Oxley Act of 2002 and The Foreign Corrupt Practices Act of 1977. This essay seeks to discuss major legal and ethical issues facing international business. The most common ethical issues affecting Multinational Corporations are employment practices, environmental regulations, human rights, moral obligations and corruption. Although many scholars and economists a have suggested that employment terms and conditions should be the same across nations this is a rare phenomenon as countries are bordered by differences in legislations. Inferior employment conditions in the host country places a multinational organization in a dilemma concerning the kind of legislation that should be applied. The concern is whether to follow those of the host country, those of its home nation or seek other alternatives. For instance in developing nations, workers are subject to many working hours, mostly 12 hours with extremely understated payments and lack protection against harmful substances used in factories. Besides that, they are deprived enjoyment of social security services such as the National Social Security Fund, Hospital Insurance Fund and Retirement Insurance Funds. A recent case is that of Nike when the media revealed poor working conditions at many of its subcontractors. The report showed women in a Vietnamese subcontractor who worked for about six days in a week under hazardous environments. Their basic salary was about $3 per day and they were forced to work for unpaid overtime. Therefore, it is a primary obligation for managers in multinational corporations to establish standards that are menially acceptable in order to safeguard the dignity and the basic rights of employees in their foreign subsidiaries. Confidence of employees who are subordinated to the managers can only be build if their rights are adequately respected. They become certain about their workplace status with regard to intimacy, liberty and fair salary consequently becoming devoted to their respective tasks. Successful attainment of the organization’s strategic goals is the end result in this cycle. Human rights are another ethical dilemma faced by many multinational corporations. According to the Universal Declaration of Human Rights, respect for human rights is unavoidable and fundamental part of any responsible business. As a matter of fact, more and more businesses have come to the light of this fact are integrating considerations of human rights into their mainstream business operations. However, several other companies have been caught up in activist campaigns, lawsuits, public scandals and consumer boycotts over allegations of human rights abuses. Across the diverse business sector, leading companies are incorporating mechanisms aimed at addressing issues of human rights including improved workplace conditions; racial, gender and religious equality; eliminating child labor; freedom of association; avoiding compulsory or forced labor; supplying essential needs to workers living in poverty; ensuring security of workers; and engaging the government and other stakeholders in the promotion of human rights. The UN Global Compact, launched in 2000, has tremendously transformed the way in which the corporate organizations view the issue of human rights. Since its inception, over two thousand organizations have endorsed the principles outlined in this legislation including labor standards and human rights. Hoffman and McNulty (2009) suggest that multinational corporation should align their standards according to those of the foreign country. However, this is liberal and again depends on whether such human rights are inferior or superior to those of the home country. Other alternatives include a wide a range of human rights-related standards which are geared towards effective compliance with the human rights requirements. Examples include the OECD Guidelines stipulated for multinational companies and the ILO ‘Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy’ whose main focus is labor rights. An enterprise that endorses human rights responsibility is bound to benefit in many areas. Firstly, it will serve as a safeguard towards the company’s brand image and reputation. Jennings (2012) describes reputation and brand image as a magnet that attracts investors, consumers, employees, business partners and suppliers. Human rights scandals jeopardize and undermine the operations of the company. Secondly, the company gains a competitive edge based on its response towards human rights-related issues. Thirdly, business practices such as transparency and proper human rights policies are persuasive means of retaining employees and attracting new ones into the company over its rivals. Fourthly, it fosters heightened productivity since human rights strategies are geared towards elimination of religious, gender and racial discrimination. It provides employees assurance for decent wages and provides them with avenues of airing their grievances. Environmental ethics is another important part of international business ethics. It refers to the ethical relationship between an organization and the natural environment. It basically points at the decisions made by the company to conserve the environment. Presently, international regulations have becoming stricter and require International Corporations to respect environmental protection legislations of the host countries. However, majority of these companies are tempted to defy these rules as the costs incurred have a high potential of diminishing the company’s competitive advantage and profits. Issues of environmental pollution are quite serious and therefore, substantial regulations have been developed by many governments across the globe to regulate dumping of toxic substances, use of life threatening materials in workplaces and emission of pollutants by production companies. Even so, many of the companies especially in developing countries are hesitant in following the rules and many multinational companies do take advantage of the situation. However, multinational companies should strive to adhere to the rules considering the devastating effects of environmental pollution and scandals that might befall the company (Walker, 2000). Corruption is another major ethical dilemma faced by international businesses. Corruption is complex and can fit into many descriptions. Essentially, corruption is unethical behavior involving money, favors or privileges for a given action that will directly or indirectly harm someone else. Unethical behaviors such as bribery, kickbacks, fraud and espionage are categories of corruption (Hoffman and McNulty, 2009). Whereas corruption is highly condemned in some nations, it is a common phenomenon in some. Developing countries are particularly leading in corruption which then underscores the need for moral uprightness for companies that intend to open up branches in such countries. In this case therefore, it is appropriate for such companies to follow legislations of their home countries to avoid public scandals. For instance, multinational companies in the USA are guided by the Foreign Corruption Practices Act (FCPA) adopted in 1977. Interdicted practices detailed in this document include payment of any sum of money to an influential person in government or otherwise to support the survival of the business or any other form of indirect payment that would lead to an illegal activity. This law imposes rigorous record keeping of payments and regular auditing of these records. Corruption has many detrimental effects among them low economic growth and reduction in business investment returns (Ruggie, 2007). Moral obligation is another ethical consideration of great importance to international businesses. Companies have a primary responsibility towards its stakeholders as well as other persons outside the company. Hestad (2007) asserts that the corporate responsibility of a company varies depending on the context for example if the company is opening a branch in a rich or poor country. These responsibilities include treating stakeholders with integrity and dignity, producing safe and high quality products and offering them at reasonable prices to customers, ensuring that managers and employees are provided with development opportunities and are rewarded accordingly, providing fair returns on shareholder’s invested capital and generally acting as loyal citizens to the global, national and local communities. In addition, multinational companies should promote and protect certain public interests such as taking part in nationwide campaigns to eradicate poverty or HIV/AIDS. In conclusion, ethical issues are imperative to the success of international businesses. Employment practices of any organization should portray the stipulated regulations in the legislations of the host country, home country or international standards. Human rights should be adequately considered while starting up business in a foreign country as it is a fundamental part in the success of the business. Corruption is yet another ethical dilemma that could compromise survival of the venture. Clearly, multinational corporations have ethical obligations towards its stakeholders as well as the larger public which is part of social corporate responsibility. Failure of adherence of these ethical considerations risks the survival of the business in foreign countries. References Gangone, A. (2010). Ethical issues in international business. The Annals of The "Ştefan cel Mare" University of Suceava. Fascicle of The Faculty of Economics and Public Administration, Volume 10, Special Number. Hestad, I. (2007). Corporate responsibility of multinational corporations. CMI brief, Volume 6, Issue 2, p. 1-5. Hoffman, W. and McNulty, R. (2009). International business, Human rights and moral complicity: A call for declaration on the universal rights and duties of business. Business and society review, Volume 114, Issue 4, p. 541-570. Jennings, M. (2012). Business: its legal, ethical and global environment. Mason: South-Western Cengage. Hoffman, W. and McNulty, R. (2009). Corporate Crime. New Brunswick: Transaction Publishers. Ruggie, J. (2007). Business and human rights. Corporate social responsibility initiative, working paper no. 38. Walker, J. (2000). Environmental Ethics. London: Hodder & Stoughton. Read More