Question

Corporations have had a difficult time, at times, balancing profits and obligations to shareholders and what the majority of people feel is moral in particular cases. For example, it is legal to produce textiles overseas where child labor is acceptable; however, many a textile seller has faced harsh criticism and boycotts for doing so (e.g., Kathy Lee Gifford scandal). Should US corporations be held to the same standards we require in the US when they are operating in other countries? Should they be held accountable morally for engaging in what we would consider unethical conduct? In your opinion, how should that relate and/or affect a corporation's duty to earn a profit for shareholders? Be sure to comment upon at least two other students' posts in addition to your own.

Answer 1

As businesses expand internationally, they must not only understand an organization’s mission, vision, goals, policies and strategies but also must take into account the legal and ethical issues in international business. When companies plan their long-term expansion into a foreign environment, they must tackle serious moral and ethical challenges and decision-making in order to make their expansion a success.

Some of the most common ethical issues in international business include outsourcing, working standards and conditions, workplace diversity and equal opportunity, child labor, trust and integrity, supervisory oversight, human rights, religion, the political arena, the environment, bribery and corruption. Businesses trading internationally are expected to fully comply with federal and state safety regulations, environmental laws, fiscal and monetary reporting statutes and civil rights laws.

Cultural considerations can also make or break a company conducting business globally. Every culture and nation has its own history, customs, traditions and code of ethics. Cultural barriers include language, which often means a company must rely on translators when speaking to business contacts and customers. Gender can be an issue in countries where women do not have the same rights as men. Religious holidays and other cultural events can prohibit trade at certain times. Acting in accordance with ethical and cultural values is crucial for a multinational company to win clients’ support and business and to achieve a competitive advantage in a particular market.

At the other end of the spectrum from cultural relativism is ethical imperialism, which directs people to do everywhere exactly as they do at home. Again, an understandably appealing approach but one that is clearly inadequate. Consider the large U.S. computer-products company that in 1993 introduced a course on sexual harassment in its Saudi Arabian facility. Under the banner of global consistency, instructors used the same approach to train Saudi Arabian managers that they had used with U.S. managers: the participants were asked to discuss a case in which a manager makes sexually explicit remarks to a new female employee over drinks in a bar. The instructors failed to consider how the exercise would work in a culture with strict conventions governing relationships between men and women. As a result, the training sessions were ludicrous. They baffled and offended the Saudi participants, and the message to avoid coercion and sexual discrimination was lost.

The theory behind ethical imperialism is absolutism, which is based on three problematic principles. Absolutists believe that there is a single list of truths, that they can be expressed only with one set of concepts, and that they call for exactly the same behavior around the world.

Whatever ethical standards a company chooses, it cannot waver on its principles either at home or abroad. Consider what has become part of company lore at Motorola. Around 1950, a senior executive was negotiating with officials of a South American government on a $10 million sale that would have increased the company’s annual net profits by nearly 25%. As the negotiations neared completion, however, the executive walked away from the deal because the officials were asking for $1 million for “fees.” CEO Robert Galvin not only supported the executive’s decision but also made it clear that Motorola would neither accept the sale on any terms nor do business with those government officials again. Retold over the decades, this story demonstrating Galvin’s resolve has helped cement a culture of ethics for thousands of employees at Motorola.

There are plenty of examples of businesses and their employees who make good decisions that also turn out to be profitable. Yet we know that doing what's ethically right does not always contribute to short-term profits. For example, refusing a bribe and consequently losing a contract will negatively affect the profits a company could have received if the employee had decided to take the bribe. However, you could argue that refusing the bribe actually contributes to long-term profits because a company that refuses bribes won't have to deal with the inevitable consequences that would come when the company is found in violation of the Foreign Corrupt Practices Act (FCPA). So, while ethics may not be compatible with short-term profits, in the long-run a company can pursue both ethics and profits.