Ethical Standards At International Business Level

Emerging Trends of Corporate Social Responsibility

Describe about the Ethical Standards at International Business Level.

Over the decade’s stakeholders have been agitating for the organizations to be in front line in addressing some of the problems affecting the society. Ranging, from environment conservatives, governments, employees to communities, the pressure has been too high for the organizations to accommodate. The majority of the stakeholders have argued that organization derive their charter of operation from the society and thus they should pay back through engaging in corporate social responsibility (Bichta, 2003, p. 14). Similarly, according to Ismail (2009, p. 202) companies contribute largely to the problems facing the society and therefore they should be part of solving those problems. For example, organization affects the society through pollution, excavation of the land which results to the dying of the vegetation. However, it is important to note that participation in the corporate social responsibility may not be the interest of the shareholders (Jensen, 2002, p. 238). From the shareholder’s point of view, businesses are profit-maximizing entities but not the social asset as perceived by some of the stakeholders. Whether to run the business as a social asset or and to strictly adhere to profit maximizing objective has been a challenge for many managers both domestically and globally (Secchi, 2007, p. 355). In return, managers are left with an ethical dilemma in deciding which objective to pursue. This requires the managers to come up with the sound ethical standards that will ensure that the needs of the majority of the shareholders are satisfied. This is because the majority of the international managers are faced with challenges of coming up with the appropriate ethical standards while operating in the global arena. This paper aims to discuss, elaborate and provide recommendations on the most suitable ethical standards that global managers should apply.

Emerging Trends of Corporate Social Responsibility

Globalization of business operations has availed the company’s directors with strange, unknown, and non-contributory stakeholders other than the ordinary shareholders. Previous scenarios of organizations versus stakeholders conflicts have proved that for organizations to run successfully have to put into considerations the interests of all the stakeholders (Carroll & Shabana, 2010, p. 87).  To overcome this, the company’s corporate boards have been paying greater attention to the interest of the stakeholders. Additionally, companies have come up with policies that have made corporate social responsibility the integral part of the company operations (Fontaine, 2013, p. 116). The above-discussed aspects can be attributed to some of the emerging opinions among various stakeholders about the role of the business in the society.  Some of the major trends behind forces influencing the organizations to engage in the corporate social responsibility are as discussed in the following paragraphs.  

Home and Host Countries Ethical Standard Analysis

The world Investment Report (2012) advocates that there are over 200, 000 multinational companies operating globally (Gan, 2006, p. 225).  The rapid growth of the international companies has resulted to the questioning of their impacts in the society. In return, this has been evidenced by high demand by the stakeholders for the organizations to take responsibility for economic, environmental and social consequences of their actions. Alternatively, it has been argued that the organizations obtain their benefits from the society and thus should aim at improving the environmental, economic and social welfare of the society even if they do not contribute to their damage. This may bring a challenge for an international manager on how to deal with the same if the ethical standards of his or her country state otherwise. 

Over the last two decades, the world has experienced the high profile financial misdeeds cases perpetuated by the corporate boards (Bantekas, 2009, p. 312). The most robust examples are that of WorldCom, Enron, Parmalat and others. This has contributed to the loss of trust among the international companies’ corporate boards by the hot country shareholders.  To overcome this phenomenon the international manager has to ensure that the company is committed to ensuring sound financial management. Similarly, some global companies have been accused of practicing social and environmental irresponsibility. For example, Nike’s labor in the developing countries; the oil spills by Exxon in Prince William Sound in Alaska; marketing practices of baby formula brand by Nestle.  These scenarios have contributed to extensive scrutiny of the multinational corporations about the benefits they will accrue to the society. This situation encourages the international manager to adopt to the international ethical standards so that the company may find its position in the society. 

The emergence and pressure of the civil society activism have encouraged the stakeholders to demand more from the companies and other organizations (Smith, 2011, p. 22). Non-Governmental Organizations such as Fair Labor Association, Rainforest Action Network, Greenpeace, Amnesty International and Oxfam have largely influenced corporate decision-making social responsibility. For example, they demanded that the organization policies should be friendly to human rights; environmental protection should remain on the agenda of the companies; labor standards should be adhered to, and society should have access to necessary medical care. Civil society is the core part of the society that exists between the government and the business, and thus global managers should ensure the applicable ethical standards do not contravene the opinion of the civil society.  

From the emerging trends of the corporate social responsibility in the global arena, it comes out quite clearly that the there are no particular ethical standards which should be applied in all the contexts. This gives an international manager a challenge to first scan and evaluate the environment before coming up with a decision which ethical standards to apply. The above trends give a manager the fundamental basis which he or she can scan the global environment. Given that different nations adhere to various ethical standards, it is the responsibility of the manager to determine which ethical standards are more beneficial and acceptable. In the event where the national ethical standards seem to benefit the stakeholders more than the foreign standards, then the manager should go for the domestic ones. However, for them to be applicable, the manager has to consider whether they are legal in that country.

International companies and organizations play a critical role in promoting social welfare. However, all this depends whether the company is embracing the host country ethical standards or it has its country ethical standards. It is fundamental to be aware that the different countries exhibit different cultural diversities. Therefore, it is the role of the international manager to study and determine whether adopting his home ethical standards will be against the cultural norms and morals of the host country (Mohamad, 2010, p. 152). Additionally, there are ethical standards which are applicable globally, and thus they should also be put into consideration. In the case where the manager’s home country ethical standards do not apply as well as those of the host country, the manager may decide to come up with the new ethical standards that will be legal as per host country governing laws and at the same time help in meeting the needs of all stakeholders.

Apart from host country culture and governing laws and employment standards also a business code of ethics can be major challenges for the international businesses. For example, an unethical practice that cannot be applicable in a particular country can be unethical practice for another country. This calls for an international company to position itself between both home and host countries ethical standards. This will enable the global company to survive in the host country’s market and industry.  For a further and extensive discussion of ethical standards applicability by the international companies, this paper uses the examples Nestle and Exxon Mobil companies.

Example 1: Nestle Company Business Ethical Standards

Nestle is ranked as one of the world largest company dealing with fast moving consumer goods. The origin of Nestle can be traced in Switzerland in 1906 as a result of the merger of the two companies. The two companies that merged to form Nestle were Farine Lactée Henri Nestlé Company and Anglo-Swiss Milk Company. From then the company has been experiencing tremendous growth and expanding its operations in the global arena. However, in the period of a decade, there has been widespread of information about the poor business ethics among many international companies including Nestle Company (Andrei, 2015). This has received a lot of attention as well as criticisms among the stakeholders around the world. The main ethical issue which shed Nestle Company into light was as a result of endorsement of infant formula brand with unsafe and ambiguous strategies (Muller, 2013). Additionally, the company was accused of using suppliers who did not value human rights and the promotion of human health harmful food. (Mattera, 2014)

Unethical Marketing Practices of Artificial Infant Milk

The promotion of the artificial infant milk by the Nestle has received a lot of criticisms. This has not only been in the host country but also by the world at large. Many global organizations argued that the promotion was harmful and misleading (Smith, 2015). This is because the marketing was in contrast with the international symbols of marketing breast milk alternates.  The Nestle advertisement encouraged mothers across the globe to adopt bottle-feeding instead of breastfeeding. Besides, they provided the mothers with a free sample to persuade them to adopt to their strategy. Alternatively, Nestle argued that mothers with twins lack the ability to breastfeed and thus they should go for breastfeeding. The Nestle argument had no scientific proof as the international health organizations disputed due to lack of sufficient, reliable and relevant evidence (Babymilkaction.org, 2010).

This was another unethical practice that put Nestle Company into problems. The company used to purchase its coca from Ghana and Ivory Coast suppliers. The investigation carried out indicated that the majority of the workers in those cocoa plantations were underage (Smith, 2015). Despite, being young they worked approximately 80 to 100 hours per week and the compensation was not fair.  Upon the widespread of this information across the world, Nestle was largely criticized by labor and health organizations. The company had no other option other than to bow to the pressures of the international community (Mattera, 2014).

Violation of the Employees’ Rights

Nestle has received a lot of criticisms due to its disrespect to the workers’ rights. For example, in Colombia, the accusation was intense where the company was accused of assassinating some of its employees because they were part of the labor union (Smith, 2015). In another scenario, the company has been accused of treating a work to disown the union or else he was to be fired.

Promotion of Unhealthy Food

In one of the recent reports, Nestle was criticized for promoting breakfast cereals which contained the highest level of salt, sugar and fat (Andrei, 2015). Again, the company was also accused of failing to play its responsibility while promoting its products to the public.  As a result, the company food lost reputation in some major parts of the world. This has cost the company heavily as it tried to make necessary changes to gain back public image.

Example 2: Exxon Mobil Company

Exxon Mobil Company is a global petrochemical corporation based in the United Sates. The Exxon Mobil company policy is to comply with will all states regulations, rules and laws applicable to its business. However, this contradicts some of the unethical standards that the company has been portraying in different scenarios (Mathew, 2015). The company came to fame when it spilled over eleven million gallons of crude along the coastline of Alaska. This was termed as one of the most unethical standards exercised by an international corporation (Carr, 2013). The company confirmed to the pressure from the stakeholders and resulted in cleaning the whole mess it had caused. However, the report indicates the company carried inefficient cleaning and as a result the effects of the oil spillage (Conrad, 2015). 

It cannot be disputed that the companies exist to generate profit. However, they should ensure that they do not pursue the objective of the profit making to benefit the few stakeholders at the expense of the other big percentage of the stakeholders.  The practice of the Exxon resulted to the realization of higher profit margins but at the expense of other stakeholders including physical vegetation and animals. This led to exposing of the company standard as unethical which negatively affected the company products and reputation.

The Exxon human resource has been accused by many for undertaking unethical business practices. The company employees have to be criticized for ignoring children rights (Ashworth, 2015). Additionally, it has been found that the company helps employees to cover up wrong misdeeds done against the students. Many human right activists have extended these accusations to the company itself despite holding the employees accountable. For example, in some of the scenarios the Exxon has been shielding oversea employees who have been causing harm as well as the displacement of the children left behind. Those who oppose these acts argue that there are established court procedures and policies that can help the employees to pursue other opportunities without necessarily affecting their children. However, the Exxon practices seem to contradict with legal rules and thus resulting in conflict from the concerned stakeholders.  

Reference Examples Analysis

Upon analyzing the above two examples, it comes out evidently that there might be no appropriate ethical standards to be applied in all situations. Neither the home country ethical standards nor the host country ethical standards can be adopted fully as the appropriate. Therefore, an international manager requires to examine both the foreign and domestic ethical standards and pick the ones which suit best for the host country. Additionally, where the ethical standards gap exists the manager can come up with the new ethical standards as per the legal rules, state governing laws and cultural practice exhibited in the host country. This paper holds that there are no rigid ethical standards either be the home country ones or those the host country. Therefore, the paper offers various recommendations that an international manager should adopt. 

Addressing Ethical Standards Differences in International Business

According to Godiwalla (2012, p. 1382) ethical decision making among the international businesses is more challenging than in domestic operations. Culture-based codes differ in different countries making it difficult for the managers to adopt to different ethical codes in different markets (Spence, 2007, p. 542). In most of the times, the manager finds himself in an ethical dilemma in deciding whether to act of the ethics which are unacceptable in his or her home country and essential and expected in the host country. To address, international managers have to be equipped with skills and knowledge on how to address standards differences in the expressed in the different parts of the world (Saunders & Thorne, 2012, p. 7). This paper offers various approaches that the international managers can adopt to address these differences.

Keeping of the unique ethical atmosphere for each international market will ensure that the company uses the ethical standards relevant to the environment of each market (Pitta, et al., 2009, p. 246). However, the establishment of these ethical codes without proper will be futile, and they may fail to work. Therefore, to make the ethical standards effective, managers and other company top executive employees should make them their priority to set an example for other stakeholders of the organization to emulate. To make this applicable the international manager can avail the ethical codes at foreign subsidiaries, branch offices and high traffic areas at the home office. Additionally, the international managers should strive to justify the new ethical codes for other stakeholders to take them seriously.  According to Mujtaba & Cavico (2013, p. 62), it is very crucial to involve the host country employees establishing the ethical standards. This helps to make the codes of the ethics more reliable in the new foreign markets.

Consideration of Host Country Traditions and Customs:

To avoid conflicts with host country stakeholders, the international manager should carry out the analysis of the locals’ traditions and customs (Barton, 2011, p. 86).  This will help him or her in adopting the suitable code of ethics while addressing such issues such as deforestation, child labor, environmental issues such as humanitarian conflicts. On another side, it helps the manager to apply his or her discretion when dealing with matters concerning wages considerations and bribery. For example, the manager can use his judgment whereby he may opt for giving cash gifts to government officials where the entry to the market is denied. Alternatively, the manager may decide to avoid the entry of the market whereby the necessary law materials are provided by the supplier who practices unethical standards.

Apply the ethical codes consistently, equally and among all the stakeholders:

Provided that the ethical standards do not conflict with the legal system, culture and employment provisions of the host country, the international manager should stock the established ethical standards. However, if there are home country ethical standard governed by a particular policy, then the manager should be ready to turn down the opportunities in the home country that seems to violate that policy. Even if the manager is to reject the opportunity he has to do it in a courteous and a respectful manner. This helps to express the respect of the host country established ethical standards. Additionally, when the manager is turning down unethical opportunities he should act as if he superior but to simply explain that by agreeing to the opportunity will lead to a violation of the company ethical standards. This will ensure that the company maintains a good relationship with the stakeholders for future opportunities. However, an international manager should note that if he accepts to put into consideration the host country customs when coming up with ethical standards, he should not overlook the host country due to the differences in his home country. This should be followed by making sure that all the company managers and employees understand the manager commitment to ethical standards.

Conclusion

From the evaluation of ethical standards applicable to the international business, there are no fixed ethical standards. Businesses environment differ from one part of the globe to another and likewise business code of ethics. Therefore, the progressive international managers should neither strictly dwell on the home country ethical standards nor the host country ethical standards. However, they should borrow some aspects from both home and host countries business code of ethics. Alternatively, they should design new ethical codes that will ensure they are relevant to the given market as well as to the company policies. To make this effective the manager should make ethical standards a daily training for the new hires. This should be directed to the areas of concern where they should be highly practiced.

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