Ethics in Business

by Simon Webley

Cross-cultural problems

One of the most difficult areas of business ethics concerns dilemmas arising in countries where laws, values and customs are different from those in the company’s home country. As well as global corporations, this involves businesses with investments in overseas countries and those with joint ventures, partnerships or trading relationships with foreign companies.

In emerging markets, for example, inadequate information, volatile and unstable financial regimes and considerable host government involvement can lead to a range of ethical dilemmas. Managers may find themselves caught up in difficult questions of right and wrong. They may need to choose between the company’s obligations to domestic stakeholders and those stakeholders based in the host country.

Best practice is for companies to draw up guidelines with the help of local directors to address sensitive issues such as bribery, discrimination and relations with local governments. These guidelines should make it clear that those acting on behalf of the company – its agents and partners – must be included in the provisions of the code. Clearly, the agents and partners need to be informed of their obligation to follow the code, otherwise problems will almost certainly emerge and the company’s reputation will be at risk. Overall, a company should aim to anticipate such problems before they become public issues, but that is not always feasible.

Honouring the principles of equal treatment of men and women provides an example of an area where diverse cultures can affect the application of a code. Most domestic codes of ethics have a policy on non-discrimination on grounds of gender, while many state that they have an equal opportunities or diversity policy. Yet in countries where a Muslim culture predominates and the law is different, the policy often has to be applied differently.

Another example is the policy on the giving and receiving gifts or favours and making facilitation payments, which can often be controversial. Under the Anti-terrorism Act of 2001, it is illegal for a UK company to make a facilitation payment to a public official anywhere in the world. However, in some cultures – those in SE Asia for example – it is considered offensive not to give or accept modest gifts on certain occasions. In this case, reciprocity is one consideration to take into account when framing a policy. In other words, can I/they give or offer a gift/hospitality of similar value or scale? Company policies differ.

Current practice

Issues covered in the codes of multinational corporations indicate that the most common cross-cultural issues addressed are

  • Gifts (hospitality and bribes)
  • Equal opportunities and discrimination
  • Protection of the environment
  • Conflicts of interest
  • Supply chain.

Most codes produced by multinational corporations recommend approaches to these issues that are applicable worldwide. Furthermore, they emphasise the need to ensure that the policy is communicated to all their employees and partners in every location. Each code is prefaced with a strong statement from the chairman, president or CEO explaining the importance of the document and providing clear guidance about how it is to be used.