Major Legal and Ethical Issues Facing International Business in the World Today - Coursework Example

Major legal and ethical issues facing international business in the world today (Insert Name) (Institution Affiliation) With the increasing internalization and globalization which has recently become of key importance, many companies have started looking abroad with an aim of expanding their business and the world is becoming more interconnected. The Importance of ethics and legal framework in the business world is global and superlative. As the world continuously open up for foreign firms, the number of multinationals is constantly glowing and new business destinations are being created every day (Mahdavi, 2009). However, new ethical and legal issues and trends arise on a daily basis and are likely to cause a burden to the organizations and their esteemed customers. The challenges that the company must handle while going international are new and unfamiliar. The multinationals thus need to instill proper ethical behaviors in order to avoid possible lawsuits. The public scandals especially involving corporate malfeasance and some misleading unethical practices have adversely affected the perception of the public on the way various organizations conduct their businesses. The recent global business expansion and the fall of the trade barriers across the world have further underlined the interests particularly in the topics of social responsibility and ethical behavior. This paper discusses the major legal and ethical issues facing international business in the world today. It also and address the common question of whether multinational corporations should be bound by an international ethical standard or should domestic considerations be the guiding principle. Ethical and legal issues that were traditionally considered irrelevant are now becoming crucial as the international companies face new obstacles in their daily routine. One of these obstacles is culture. Culture is capable of influencing business activities in various ways. Ethical differences, language problems, culture collisions and pricing difficulties are common issues especially in the beginning. The multinational companies must be able to operate in an environment with diverse cultures and be able to handle these differences in a manner that is satisfying to all the parties involved (Mahdavi, 2009). Disrespect or ignorance of the foreign culture can cause mistakes which are usually hard to correct and this might lead to destruction of the entire operation. Recently, there has been a heated debate on the ethics subject especially in the international business issues. This debate has been sparked by speculation that some of the multinational companies were conducting unethical business operations in the overseas countries especially China. These firms purportedly conducted their business without following rules and regulations as they do in their own countries. For instance, the companies pay attention to some issues such as product safety, working conditions and work safety in their domestic operations whereas they abuse the legal and regulatory environment in the foreign country. The national codes of many nations put more emphasize on the ethical nature of reputable corporate governance. These nations place a special emphasis on the fact that ideal governance is the one that is based on some cardinal ethical values. Among the values that should be given allegiance for the sake of good governance include accountability, transparency, probity and responsibility. These values should diffuse itself in all aspects of the governance and be displayed in all decisions and actions of the company board. Various aspects of governance such as board function and compilation, disclosure, risk management and reporting are usually seen as instrumental in realizing the cardinal ethical values that will ensure good governance. As the multinational companies continue to enter into the foreign markets and expand globally, the ethical conduct of their employees and officers assumes an added importance since the very cultural diversity associate with the expansion might also undermine the shared cultural, legal and ethical values observable in the community homogenous organizations. Although sometimes the understanding of the cultures of other people and recognition of the existing differences will enhance the cross cultural communication, it may not be sufficient to provide feasible guidelines for proper ethical behavior in the organization. Therefore, the concerns about the unethical behavior of the corporations in other countries are manifested in the legislations. According to a survey that was conducted in over 300 multinational corporations across the globe, seven major items were identified as being ethical issues for businesses. These issues include: inappropriate gifts to corporate personnel, employee conflict of interest, unauthorized payments, sexual harassment, employee privacy, affirmative action and environmental issues. Strategies, such as these codes of ethics, are only one means of achieving the ultimate goal of having international ethical responsibility in the engagement of business worldwide. The challenge that is currently facing major international enterprises especially in Africa is finding a way to translate their commitment to high ethical standards into organizational practices. Most corporate governance fall short on this score as they provide very little guidance in ways in which various business ethics should be institutionalized in enterprises (Mahdavi, 2009). Most of these global corporations recognize the need for a standard business code of ethics since without such a code, the actions of the key players in the international arena remains uncertain. In the past few decades, foreign investors have been facing a number of legal barriers when attempting the acquisition of business assets and domestic companies in many nations. However, the legal and business climate relating to foreign investment has undergone radical transformation in the recent years, and various nations have embarked on liberalization plan of administrative practices and laws relating to global investment. Governments have put into place measures pioneered to stimulate acquisition and merger of domestic companies with multinational corporations. From the perspective of international firms, a major ethical dilemma facing the firms from the democratic nations is whether they should operate business in totalitarian countries such as china and Korea which has routinely violated the human rights of their own citizens. This issue is two sided. While some believe that investments in totalitarian countries provide comfort to the dictators and can aid in propping up repressive regimes that are accused of abusing basic human rights while others suggest that the repressive regimes would collapse and be replaced with democratically inclined governments if the foreign investors limit their contact with the dictators. However, China is currently one of the best examples of the changing ethical and legal climate. In the early 1990s, China was being criticized by many international organizations because of its violation of human rights. However, the enactment of the labor laws that brought about significant changes in the legal climate saw a considerable increase in investment from the multinational firms (Mahdavi, 2009). This was primarily due to the valuable opportunities, cheap workforce and incentives provided by the Chinese. Most of the multinationals pursued their investment regardless of the carelessness of the Chinese government on its own citizens. Today, china is an investment paradise for many multinationals and it ranks at the top due to the changing ethical values and regulations particularly in the labor intensive manufacturing. For real properties and some kinds of assets such are vehicle, planes and trains which require registration, the local government in many nations imposes registration and acquisition taxes. When the title to certain real properties or registered assets are transferred to a buyer in a business transfer involving a foreign firm or asset transfer deal, registration or acquisition taxes are imposed on the buyer. These taxes usually affect the way in which the multinational organization operates and also pricing of its goods and services. Furthermore, the nature of indemnities and extent of warranties depends on the size of the acquisition and the bargaining power of the parties involved. Some nations have laws which require the seller to give full indemnities and warranties covering the accounts of the company or business to be acquired, taxation, asset title, employee and litigation issues. In some occasions, the legal framework of these nations requires that the indemnities and the warranties be supported by a guarantee from the parent company. These legal issues to some extent affect the business activities of the multinational corporations. Fraudulent and negligent misinterpretation of the legal requirements may give rise to both civil and criminal liabilities. In various occasions, they can also furnish grounds for contract rescission and an action for damages. Several countries have established business ethics and criminal statutes which impose severe penalties for organizations who may engage in fraudulent conduct. With respect to certain industries such as banking, insurance, telecommunication, broadcasting, gaming and insurance, the business operator is required to hold a license. This requirement may be imposed under either central or local government law, or both. In today’s global business environment, it is important that the multinational corporations conduct their business activities in accordance to the international ethical standard. However, the firms must also incorporate domestic considerations such as culture, political and legal aspects in order to avoid conflict of interest. The examination of the current development in the global business and the far reaching international entities has led to the inevitable conclusion that legal and ethical concerns and issues facing international business enterprises are no longer related to limited framework of regional or national arena. The ethical and legal issues have assumed global dimensions and they therefore call for global solutions. References Ferrell, O. C., & Fraedrich, J. (2012). Business Ethics: Ethical Decision Making & Cases. South-Western Pub. Mahdavi, I. (2009). International business ethics: strategies and responsibilities. Journal of Academic and Business Ethics , 1-6. Read More