International Business Ethics - Essay Example

International Business Ethics "Different cultures seem to provide different models of moral virtue, and there may be several, some conflicting, within a given culture. For instance, the ancient Greeks had a place for the virtue of pride (an appropriate sense of one's honor), while medieval Christian monks thought humility more important. The ancient Greeks had a moral ideal of seriousness, which could be expressed in religious, philosophical, or ethical activity, but not so easily in physical production; early modern thinkers, however, recognize a virtue of industriousness, which tend to be expressed in activity related to production, to subduing the physical environment" (Garrett p1). Virtue ethics is a philosophy that de-emphasizes rules and concentrates its focus on the 'nature' of the person acting. It does not argue that an act is good or bad but instead puts the moral fiber of the person under the microscope. To say an act is virtuous does not mean anything. There is no context for analysis. A person is virtuous, not the action itself. To say that a person acted out of virtue rather than fear of consequences and did the right thing or made the right choice in keeping with his morals better describes the philosophy of Aristotelian virtue ethics. He or she made the choice they did because they personally thought it the right thing to do, regardless of the rules or the opinions or advice of others in their society. They had the intestinal fortitude, responsibility, and accountability to themselves to make what they considered to be the right decision. Perhaps the phrase "I couldn't sleep with myself if I did it any other way" or, as the great bard William Shakespeare put it; "to thine own self be true". These everyday phrases describe the ethical nature of this philosophy. On the other hand, there are other philosophies out there as well. One of which deals with the nature of personal and societal group ethics. Jeremy Bentham's Principle of Utility founded on the philosophy of eighteenth century David Hume is one that has stood the test of the ages with, granted, some modifications. But for all intents and purposes it has survived mainly intact and is based on four fundamental pillars: Utilitarianism "(1) Recognizes the fundamental role of pain and pleasure in human life, (2) approves or disapproves of an action on the basis of the amount of pain or pleasure brought about i.e, consequences, (3) equates good with pleasure and evil with pain, and (4) asserts that pleasure and pain are capable of quantification (and hence 'measure')" (Cavalier p1). From these four pillars, Bentham developed utilitarian calculus as a way of measuring whether an act gave more pain than pleasure or vice versa. If it was demonstrated that the action was more pleasurable than painful then it was in keeping with the utilitarian philosophy and the action should be undertaken. This was modified over the years by philosophers such as John Stuart Mills and Ludwig Von Mises to come to mean the greatest good (or happiness/pleasure) for the greatest amount of people. There are a variety of utilitarian philosophies that have evolved since the time of David Hume. Two of those have bearing here. Act utilitarianism and rule utilitarianism. The first is whether an act itself is morally good defined as meeting the four rules. The second is an action taken by evaluating a rule and then following the rule that brings the most good or happiness to the most people. This appears to give the notion that there are good and bad rules. The question arises that if we follow utilitarian principles how can we make bad rules Aren't we following Act utilitarianism in making those rules Can bad rules come into being even with the best intentions These two philosophy's, virtue ethics and utilitarianism, have at their core one basic fundamental difference: individual versus society. Virtue ethics proposes that the person should make the right choice because they have considered all necessary things, been brought up right, were educated in the ways of the world, taught what is right and wrong (influenced by the bias of those doing the teaching) and therefore, based on that analysis, established their own high moral values which they now use when making every decision in their life. Utilitarianism asks this very same person to not only have established those same moral values described in virtue ethics but in addition to all that hard work they must also weigh the consequences of their action by ensuring that it provides the most good to the most people. Let's see, by this definition, communism would be the closest thing to a political system that would adhere to utilitarian principles. It provides the greatest good to all the people. Does ethical philosophy apply to the Multi-National Business Entity (MNE) If it does, should it Businesses are after all, an agglomeration of people. People do have ethics. Are they all the same Perhaps they're not. Do all peoples of an ethnic origin define good the same way Do they define pain, pleasure, or evil the same way Religious sects have argued these concepts since their foundations and will probably argue them for all time. Without getting into a philosophical argument of heroic proportions let's agree to disagree at this point and deal with the MNE and the issues it faces in the ever-shrinking international world of business. With the free (it's most generous definition is used here) flow of information on the Internet, television, print, and other media vying for viewer attention, corporate corruption, child labor issues, executive pay, environmental pollution, effective management of natural resources, education of its people, and a host of other topics have presented themselves. They have done so not to increase subscriptions or ratings during sweeps week but solely so that we can decide whether a company such as Levi Strauss, or New York Life, or IBM, or Monsanto have business ethics and use them in their everyday dealings. The question of whether an anthropomorphic entity such as a corporation should even have ethics is a concern of our world today. Why Businesses are in the business of making money. I'm reminded of Michael Douglas in the movie, Wall Street, "Greed is good!" Businesses have a responsibility to their owners and shareholders first and all others second. Don't they That's true in an epistemological sense but, in light of a more enlightened buying public, particularly in the non-third world countries, that may not be strictly the case anymore. Everyone on the streets of the United States, or Britain, or France, knows that there is global warming. Some of them even think they know what causes it. That's surprising because scientists don't even know if it's really happening. But, it's an issue now that businesses have to be aware of because without buyers of their products, they're out of business. So, if pollution of the environment and mismanagement of natural resources help cause global warming then any company associated with doing either has a problem. Why Self-interest. Businesses are not going to be able to sell their products to people with the moral values that believe that corporations and their treatment of the environment are mainly responsible for global warming. John Hendry identifies four basic problems that are constantly being faced by business today. They are: Finding the proper balance between obligation and self-interest; avoiding being left with a choice between the 'lesser of two evils'; proper and fair distribution of goods and welfare between large numbers of people; and, avoiding conflict between specific duties of someone's role and that person's general duties to others. Hohfeld's analysis speaks to the duties or obligations and the rights and privileges of the individual. Hendry looks like he is drawing from this analysis when presenting the four problems that face establishment and maintenance of ethical business practices. Enron is an example of a company that was rampant with corruption at the highest levels who's fall even managed to bring down one of the Big Four, if not the One, accounting firms; Arthur Anderson. Still, if you are like me, then, one side is saying, "How could they get away with something like that ", and the other side is saying, "Yep. Happens all the time. They just got caught." Good and evil; pleasure and pain; right and wrong; all moral judgments. Both sides of the coin exist in all of us. Sticking with the right side is the tough part. "Ethical problems were not restricted to financial and accounting issues. With growing public concern about global environmental damage and the employment practices of Far Eastern sweatshops, American corporations were at the centre of many of the most damaging allegations. Nike and Gap were accused of turning a blind eye while their suppliers used child labour and employed people under prison-like conditions." (Hendry 8) Both sides of the coin exist in anthropomorphic entities such as MNE's also. Their management knows they should do the right thing. They were brought up that way. Maybe. But, the question is, what is the right thing That's the moral dilemma; profit at the expense of people's welfare "What makes all of these issues particularly serious is that that they are not just cases of individual immorality, but breaches of trust. Business executives are appointed, and trusted, to serve their shareholders and take due care of employees and other stakeholders" (Hendry 9) But, sometimes these trusted executives convince themselves that they need to work their people just a little bit harder, cut some corners here and there, save some money on how they treat toxic waste, turn a blind eye to sweat shop labor, or cut some wages temporarily so they can show the boys on Wall Street the quarterly earnings report they expect. Without it the stock drops and the stockholders lose money. These executives have fallen victim of Hendry's first, second, third, and fourth problems. "Exxon and other oil corporations attracted a string of accusations covering not just pollution but also improper political influence. Chemical and pharmaceutical corporations were charged with diverting the course of university science departments and misrepresenting their findings. Monsanto and other corporations were charged with distorting the regulatory process" (Henley p8). MNE's are profit driven entities; capitalism personified. If they don't grow and, instead, start to shrink, they will disappear. Their competitors will swallow them whole. However, the MNE's are getting caught more and more by watchdog groups and disenfranchised internal personnel and are being made accountable for their actions. Along with accountability comes responsibility. With responsibility comes ethics. The days of caveat emptor are gone. A specific issue was raised in the Financial Times. That of executive pay. "Luc Vandeveld, the Marks and Spencer executive chairman who last week turned down an 816,000 pound bonus is unlikely to inspire many imitators. While his gesture was not unprecedented, it is extremely unusual" (Skapinker p1). The article further states, " remuneration climbed 16 per cent last year, giving the average company head total pay of $10.9M, a new record, according to Pearl Meyer & Partners, the consulting firm. The highest-paid U.S. chief executive last year was John Reed . . . . Mr. Reed gained $293M . . ." When considered against Mr. Reed, Mr. Vandeveld's gesture pales. It's outrageous that one person makes more per year than some GNP's of small countries. The question though is whether Mr. Vandeveld's gesture was inspired by moral ethics. Did Mr. Vandeveld do the right thing for the right reasons Should other exorbitantly overpaid chief executives do the same thing Let's look at this issue in the light of virtue ethics and utilitarianism as updated to include the greatest good for the greatest number. Virtue ethics tells us that the moral fiber of the person should make the call when it comes to what is right and what is wrong. Ideally, the chief executive would 'look around', determine that the rewards he or she receives for their duties and responsibilities are far out of proportion with the rewards to other individuals within the company structure. He or she would then voluntarily take a pay cut, or refuse a bonus, as Luc Vandeveld did. He would do the right thing and deny his greed. Following the principles of utilitarianism as modified to the greatest good to the most people, an overpaid chief executive would realize that their salary and bonuses could be put to better use elsewhere in the company. For example, if Mr. Reed was to settle for let's say, perhaps, $10M per year in compensation, that would make over $280M a year available to pay the labor in foreign countries a higher wage and help eliminate sweat shops. Or, it could be used to treat toxic waste better, or pay higher prices for re-grown trees thereby slowing deforestation. Needless to say, it could be used in a variety of other ways. So, is Mr. Reed an immoral person Is Citigroup, the company for which he was chairman, an unethical business Using either a virtue ethical or utilitarian approach, I would have to say he and they were. Greed has gotten the better of the company and the executive. They are guilty in the first degree of falling victim to John Hendry's ethical business conundrum of obligation versus self-interest. Even outside of ethics, a stockholder in this company should raise serious questions as to whether the management had their best interests in mind when they chose to compensate their executives at this level. How much would the stock price have increased if that $280M had been thrown to the bottom line Not very virtuous of stockholder but then again, neither is the company in which they invested. Payment for goods and services rendered is actually a larger issue with greater ultimate impact than some of the other ethical practices facing businesses today. Professional sport is one of the most glaring areas where compensation, endorsements, and other remuneration packages are way out of control. This is more evident in the United States than any other country in the world. Players receive contracts for $40M and up a year not to mention other endorsement contracts. Not ethical of them at all. Is it True, they do some charity work but none of them to date have donated 90 per cent of their compensation to achieve the most good for the most people. If asked, most people in the U.S. would say they have pretty good moral standards and by and large, are fairly ethical. If that is true then how can companies get away with the things they do Duties and obligations; rights and privileges. Is it my duty to watchdog the corporations and make sure they live up to proper business ethics If I adhere to either of the above philosophies then the answer must be yes. It seems though that the more affluent a country is then the greater the self-interest of its people and the more tainted their virtues become. Business and governments are, by and large, a reflection of the people from which they stem. Hopefully that changes and ethics find their way back into the moral pattern work of society as more and more MNE's are held accountable for their actions. Works Cited Garrett, Dr. Jan Edward. "A Basic Introductory Essay", Professor of Philosophy and Religion at Western Kentucky University, pg 1 on website wku.edu, (2005) Cavalier, Robert. "The British Utilitarians", Professor of Philosophy at Carnegie Mellon Institute, pg 1, Online guide to moral ethics and philosophy, (2006) Hendry, John. "An Introduction to Ethics and its application to business, government and the professions", Incomplete Draft (2005) Skapinker, Michael. "Rough justice in the talent market: Michael Skapinker examines the issues raised by Luc Vandevelde's recent decision to turn down a generous pay bonus", Financial Times, 4 May 2001 Read More