Business Ethics-in a Global Context

Topics of Global Ethics

•Global supply chains•What leaders can do on a global scale•Mistakes made by others•Having global programs•Having a global code•Joining global initiatives•Understanding cultural differences

Introduction

• Advances in communication, technology, and transportation have minimized the worlds' borders, creating a new global economy as more and more countries are attempting to industrialize and compete internationally. Because of these trends, more companies are doing business outside their home countries. Countries though have different cultures, values, laws, and ethical standards

The Modern Business Person • The international businessperson must

not only understand the values, culture, and ethical standards of his/her own country but also sensitive to those of other countries

• Approximately 90% of American companies have a code of ethics, 51% in Germany, 41% in UK, France 30%

• Ethical codes are increasingly concerned with conduct against the firm rather than with conduct on behalf of the firm

Therefore some of the issues to consider

CultureLanguageValues ReligionTimeHistoryColour PhotographsGlobal Ethics

Culture• “Culture consists of everything in our surroundings that is made by people – both tangible items and intangible things like concepts and values. Language, religion, law, politics, technology, education, social organisations, general values, and ethical standards are all included within this definition. Each nation has a distinctive culture and, consequently, distinctive beliefs about what business activities are acceptable or unethical. Thus, when transacting international business, individuals encounter values, beliefs, and ideas that may diverge from their own because of cultural differences”

Starbucks attempt of Parisian Cafe Culture Standardisation?

The next level, Japan, India and Vietnam

Starbucks Via

The factor of language

Bacardi Pavian Tropicana- Jugo de China

•Released in France/Germany. In German translation means baboon

•In Puerto Rico it meant orange

•In Cuba though it translated as Chinese juice

United Airlines in Hong Kong

http://www.deseretnews.com/article/705365824/Wrong-flowers-can-mean-death-for-global-business.html?pg=all

Gift Giving-The Dos and Don'ts

JAPAN CHINA SINGAPORE INDIA

Always gift wrap gifts but never in white, as this is associated with

funerals

Wrapping in red symbolises good luck.

Red ink is taboo though and

symbolises the end of relationship

Gift giving is not a common practice

Rely on advice of local associates as some

may expect expensive gifts, others offended

Give and receive gifts with both hands and a

slight bow

Present a gift to all involved, value

dependant on status and only when

negotiation final

Corruption is not tolerated

Although illegal, bribes are often solicited at each

bureaucratic level

If buying a gift consult the staff in the better department stores - explain the situation

If necessary only provide token gifts, pens or items with

company logo

Gift giving is widespread

When in Rome do as the Romans do- Guide to Cultural Relativism

You must adapt to the cultural practices of the country you are in. Business people sometimes stray from their own ethical values when doing business abroad, perhaps defending the payment of bribesDoes this lead to a reduce in ethical business back home?

When in Rome

• Exxon Mobil Corp/Royal Dutch-ShellInvesting heavily in Sakhalin Island(Russian territory

north of Japan)Possibly 13 billion barrels of oil in its watersRussian rules on environment almost non-existent and

seldom enforcedSeismic blasting is dangerous, toxic could leakEndangered Western Pacific gray whale and many

salmon would die as cleanup equipment over 50miles away

Russian government and people happy for the jobsTherefore multinational companies applying Russian

cultural values rather than their own to create benefit for themselves.

Major Approaches to Managing and Staffing Subsidiaries - Perlmutter

16-15

Ethnocentric› The company uses the approach developed in the home

country, and the values, attitudes, practices, and priorities of headquarters determine the human resources policies and practices

Polycentric› The company considers the needs of the local subsidiary

when formulating human resources policies and practicesRegiocentric

› The company considers needs of an entire region when developing human resources policies and practices

Global or Geocentric› The company’s priority is the optimal use of all resources,

including human resources, and local or regional considerations are not considered important for the success of the corporate strategy

Euro Disney- A doomed name

Lessons learnt from Disney

1. Do not just be Ethnocentric. Should be geocentric and able to adapt to any single market.

2. Success in one country does not mean success in a second.

3. Expatriate managers should be provided with both cultural and sensitivity training.

4. Laws in different countries should be respected

5. Laws that apply at home might not apply abroad

Lessons learnt from Disney

6. Cultural sensitivity to differences determines the thin line between a company’s success and failure.

7. Self-reference criterion should be suppressed as much as possible.

8. The norm and formula for success should be to think globally and act locally

9. Differentiation rather than standardisation is essential for success.

10.Strategic planning should not be regarded just as a company objective but a HR imperative.

Writing an Effective Global Code of Conduct1. Form an international advisory group – group needs

to provide expertise on locality and should be a diverse group of people

2. Set clear objectives for the code – a few ideas; conduct of compliance, corporate social responsibility, suppliers, and partners. Company must be able to achieve their objectives

3. Draft content – what are the issues? Review preliminary draft.

• Need to provide a rationale as to why there is this standard

• Provide a clear definition of the issue• Provide clear guidance(through examples,

questions/answers)• Discuss additional resources for information

Writing an Effective Global Code of Conduct4. Have knowledge about graphic design – a. Use of colourb. Use of symbols-document should not

rely on country-specific symbols such as £ or $ to represent currency

c. Use of photos – photos need to represent the international character of the company and not one or two particular geographies

Writing an Effective Global Code of Conduct

5. Hold focus groups and finalise content – it is best to hold focus groups in native language and if possible with a translated code of conduct. Companies can use internal or external personnel to do this. Important not to use a member of management as this could make information less reliable if they have an agenda

6. Translate the code – Important that companies know when and how to translate a code and how to select translators. The larger the company the more need to colour/symbols etc.

Failure of adopting an Effective Global Code of Conduct

In Germany a labour court ruled that parts of Wal Mart Stores Inc.’s ethics code, including a ban on relationships between employees, violate German law. It also ruled against a proposed hotline for whistle blowing ethical misconduct.

then... Labour representatives from 91 German Wal-Mart stores sued the retail giant over the code after it was introduced without their prior approval. Under German law, employee-management councils must sign off on a wide range of workplace conditions

TIME

• Generally Americans in business value promptness• in Greece an American company lost a big contract by

imposing a deadline. The Greek company in question saw the time limits insulting and lacking finesse.

• The LA Galaxy have tried to force the hand of AC Milan, an Italian company by giving them a deadline to sign the player. The deadline has passed. LA Galaxy claim the deal is dead, Milan say there are still 3 weeks to sort a deal out

When conducting business outside their own country, should businesspeople impose their own values, ethical standards, and even laws on members of other cultures? Or should they adapt to the values, ethical standards, and laws of the country in which they are doing business? There is no easy ethical answer to this question and why it is an issue!

Business Ethics-in a Global Context

Recap

Examples

•Culture

•Language

•Values

•Religion

•Time

•History

•Colour

•Photographs

•perlmutter

•Global Code of conduct

•Starbucks

•Disney

•Bacardi

•Tropicana

•Flowers in countries

•United Airlines

•Fragrances

•+ more

Topics of Global Ethics

Global supply chainsWhat leaders can do on a global scaleMistakes made by othersHaving a global codeHaving global programsJoining global initiativesUnderstanding cultural differencesBeing an expatriate

GLOBAL INITIATIVES

1. The Caux Round Table2. Global Sullivan Principles3. UN Global Compact

The Caux Round Table 1986- Philips and

Canon The Caux Round Table met in Switzerland in collaboration with business leaders in other European countries, Japan and USA.

They created an international ethics code

A global/universal set of ethical standards6 lists were completed showing a pattern of shared values –

such as truthfulness, integrity, fairness and equality – across the globe.

These were applied to global business and highlight a universal code of conduct

The shared values assume that we have basic rights and responsibilities when doing business

If everybody adheres to this why are their still ethical issues

Problem with this is the terms in the lists mean different things to different people

THE CAUX ROUND TABLE Cont

• The CRT’s Principles for Business were published in 1994, incorporating western concepts (human dignity...) and Japanese ones (kyosei, interpreted as “living and working together for the common good”). An international code of good practices written by such senior industrialists from such varied backgrounds remains exceptional today. It was presented to the UN Social Summit in Copenhagen in 1994. It has since become a standard work, translated into 12 languages, and has been used as basis for their internal ethical assessments by international companies such as Nissan. The CRT's principal activities are an annual meeting and the publication of best-practice guides for various types of organization. Every three years, the annual meeting is held at Caux, Switzerland, where the original initiative took place in 1986

The Global Sullivan Principles

• The Sullivan principles are the names of two corporate codes of conduct, developed by the African-American preacher Rev. Leon Sullivan, promoting corporate social responsibility

• The original Sullivan principles were developed in 1977 to apply economic pressure on South Africa in protest of its system of apartheid. The principles eventually gained wide adoption among United States–based corporations.

• The new global Sullivan principles were jointed unveiled in 1999 by Rev. Sullivan and United Nations Secretary General Kofi Annan. The new and expanded corporate code of conduct, as opposed to the originals' specific focus on South African apartheid, were designed to increase the active participation of corporations in the advancement of human rights and social justice at the international level.

The Global Sullivan Principles

• Honesty, charity, virtue and beneficence are all desirable qualities, difficulty is in implementing them and the different meanings of the terms

• 125 companies have signed up to the Global Sullivan Principles programme. Mixed success

• These principles seek to encourage social responsibility around the world although some of these companies have yet to implement these principles

• Again this is the main problem with all issues related to ethics. How do you ensure these are put in place?

The Global Sullivan Principles – Rev Sullivan •E

xpress our support for universal human rights and, particularly, those of our employees, the communities within which we operate, and parties with whom we do business.

•Promote equal opportunity for our employees at all levels of the company with respect to issues such as colour, race, gender, age, ethnicity or religious beliefs, and operate without unacceptable worker treatment such as the exploitation of children, physical punishment, female abuse, involuntary servitude, or other forms of abuse.

•Respect our employees’ voluntary freedom of association.

•Compensate our employees to enable them to meet at least their basic needs and provide the opportunity to improve their skill and capability in order to raise their social and economic opportunities.

•Provide a safe and healthy workplace; protect human health and the environment; and promote sustainable development.

•Promote fair competition including respect for intellectual and other property rights, and not offer, pay or accept bribes.

•Work with governments and communities in which we do business to improve the quality of life in those communities – their educational, cultural, economic and social well-being – and seek to provide training and opportunities for workers from disadvantaged backgrounds.

•Promote the application of these principles by those with whom we do business.

The Global Sullivan PrinciplesExpress support for universal human rights Promote equal opportunity for all employees at all levels

Respect employees’ voluntary freedom of association

Provide a safe and healthy workplaceProtect human health and the environmentPromote fair competitionWork with government and communities to improve quality of life in those communities

Promote the application of these principles by those with whom we do business

UN Global Compact (2000)

•192 member states across the world•Focuses on sustainable development, human rights, gender equality, local environment.

•Helps to create fair labour practices, combat corruption, promote environmental sustainability through collaboration for change.

•10 principles organisations must adhere to•It is voluntary for organisation•Held accountable annually.•More tan 8700 companies have joined.

UN Global Compact (2000)

The purpose of which is to;Support free-trade unionsAbolish child labourProtect the natural environment

Signatory companies are required to post an annual update on their progress in these areas and are expected to cooperate with UN agencies on social projects in the developing countries in which they operate

Human Rights•Principle 1

: Businesses should support and respect the protection of internationally proclaimed human rights; and

•Principle 2:

make sure that they are not complicit in human rights abuses.  

Labour•Principle 3

: Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining;

•Principle 4

: the elimination of all forms of forced and compulsory labour; •Principle 5

: the effective abolition of child labour; and •Principle 6

: the elimination of discrimination in respect of employment and occupation.   

Environment•Principle 7

: Businesses should support a precautionary approach to environmental challenges; •Principle 8

: undertake initiatives to promote greater environmental responsibility; and •Principle 9

: encourage the development and diffusion of environmentally friendly technologies.    Anti-Corruption

•Principle 10

: Businesses should work against corruption in all its forms, including extortion and bribery. 

BARBIE CASE STUDY - INTERNATIONALISATION

The Da Vinci Code release upsets millions around the world while becoming one of the biggest selling films of all time.

http://news.bbc.co.uk/1/hi/entertainment/3663344.stm

The role of Multinational Corporations(MNCs)

•Public companies that operate on a global scale without significant ties to any one nation or region. Some can create revenue bigger than entire nations for example Bill Gates of Microsoft total worth is $62billion which would be 52nd on country list.

•Criticised for transferring jobs overseas where wages are lower

•Their financial clout means they can control money supplies, employment and economy of less developed countries

http://www.businessinsider.com/25-corporations-bigger-tan-countries-2011-6?op=1&IR=T

The role of Multinational Corporations(MNCs)

•In many cases the profit made is not spent or used in the country whose raw materials they use

•Often accused of paying inadequate wages though sometimes paying higher than local employers can afford to match.

•They create unfair competition, they can borrow money from local capital resources in such volume that little is left for local firms.

•They can negotiate lower tax rates

•Many though like logos shown opposite do adopt an ethical profile.

Common Global Ethical Issues

•Sexual and racial discrimination•Human rights concerns•Price and pay discrimination•Bribery•Corruption•Harmful products•Pollution•Intellectual-property issues.•Removal of natural resources

Consumer experience with Bribery by Country

31-50% Cameroon, Paraguay, Cambodia, Mexico

11-30% Ethiopia, Ghana, Guatemala, Lithuania, Nigeria, Togo, India, Indonesia, Pakistan, Peru

5-10% Argentina, Bulgaria, Columbia, Thailand, Turkey, Poland, South Africa

Less than 5% Canada, Spain, Germany, Hong Kong, Japan, Israel, UK, USA, Switzerland

Nestle milk formula•1

970 the formula was tested in developed countries and it was fine.

•Took product to Africa as a replacement to breast feeding

•As time past infant mortality rose

•Apparently mothers could not read how to make formula

•Also water that was mixed was unsanitary

•Nestle was criticised for its aggressive promotion of the infant formula and deployed milk nurses to discourage mothers from breastfeeding by portraying the practice as primitive

The above product removed from France, Italy, Portugal and Spain after ink was found in it in 2005

TURKA COLA- Coca Cola Boycot?

http://adage.com/article/news/chevy-chase-turkish-cola-ads-aimed-coke-pepsi/38049/

Definition

ex·pa·tri·ate  v.tr. 1. To send into exile. 2. To remove (oneself) from residence in one's native land.v.intr. 1. To give up residence in one's homeland.2. To renounce allegiance to one's homeland.n. (-t, -t) 1. One who has taken up residence in a foreign country.2. One who has renounced one's native land.adj. (-t, -t) Residing in a foreign country; expatriated: "She delighted in the bohemian freedom enjoyed by the expatriate artists, writers, and performers living in Rome" (Janet H. Murray).

Major Approaches to Managing and Staffing Subsidiaries - Perlmutter

16-47

Ethnocentric› The company uses the approach developed in the home

country, and the values, attitudes, practices, and priorities of headquarters determine the human resources policies and practices

Polycentric› The company considers the needs of the local

subsidiary when formulating human resources policies and practices

Regiocentric› The company considers needs of an entire region when

developing human resources policies and practicesGlobal or Geocentric

› The company’s priority is the optimal use of all resources, including human resources, and local or regional considerations are not considered important for the success of the corporate strategy

The Relocation Transition The Relocation Transition CurveCurve

Effects of Culture Shock on Adjustment

6

5.5

2.5

2

0

7

0-2 3-4 4-6 6-9 10-12 13-24 25-36 46-48 49+ Time in Months

Deg

ree

of

Adj

ustm

ent

Honeymoon

Culture Shock

Adjustment

Mastery

Selection Criteria for International Assignments: Managers Adaptability

Independence

Self-reliance

Physical & emotional health

Age

Experience

Education

Knowledge of local language

Motivation

Support of spouse & children

Leadership

Support from Company

Repatriation shock •E

xpert analysis of the emotional upheaval suffered by expats and ‘repats’, repatriation shock lasts three times as long as the culture shock endured by new expatriates

•Nothing in the way of a set repatriation plan exists for independent expatriates who blithely assume that they will pick up where they left off when they ‘go back home’.

•One of the main issues is a feeling of displacement, of not belonging and of ultimately having nowhere to call home which can result in feelings of panic and depression. 

•The majority of expats have planned their expatriation carefully – those who are being relocated by an employer have extensive assistance with everything from finding housing to settling in and socialising. Coming home is different and repats are often left to their own devices.

•For those who have been expatriated by an employer an increasing number are being offered ‘repatriation training’ or a home finding trip because over the years surveys, statistics and the experience of international employers have proven that those who repatriate after a prolonged period of four or more years overseas find it incredibly hard to settle back in.

Repatriation of Expatriates

percent

Didn’t know what position they hold upon return.

Firm vague about return, role and career progression.

Leave firm within three years

10 20 30 40 50 60 70

Took lower level job.

Leave firm within one year.

Time

Mo

od

Low

High1. Sweet & Sour phase - Unconsciousness2. “Welcome home” - raising consciousness3. Conscious ability to deal with repatriation4. OK you’re back!

1

4

3

2

1 to 6 months

The Repatriation Shock Model

Source, Netexpat.com, 2010

The Phoenix CornCo Company – Global business