Business Ethics in Multinational Corporations

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Table of Contents

Introduction
The nature of ethics Commercial organizations
Challenges
An exemplary example of good ethics & bad ethics in multinational companies
Conclusion
References

Introduction

In the modern business world, business is not just business as businessmen are now required not only to observe the laws of a particular country while carrying out their operations but they are sometimes further required to apply principles of morality while operating and carrying out their business activities (Trevino & Nelson 2010, 47).

Although many multinational corporate conglomerates may argue that they are obligated only to follow the laws of the region which they operate in, there is a need to come clean and acknowledge that there exists many blind spots in the law and therefore it becomes the duty of the top leadership to urge the whole organization to use their conscience and moral bearing before making any business decisions (Show 2004, 2-5).

Ethics is part of moral philosophy, which deals with morality issues. Being human beings we time and again ask ourselves what is good and what is considered as either good or evil in today’s society. Fundamentally, ethics is not universal but situational and dependent on certain types of culture what is considered wrong in Japan may be a well accepted norm in the American society.

In certain parts of the world, moral issues often do differ with a good example being Asia where gifts may not be considered as a bribe but in some regions gifts given during the negotiation phase of business may be often considered as a bribe and therefore full disclosure to the legal secretary may be required (Ciulla 2004, 62-66). Therefore, issues to do with ethics may end up being situational and pragmatic in nature depending on the culture of the people who you come across.

The interests of the ownership and investors may be very important and the primary concern of the management together with top organizational leadership but in this era it is impossible to turn a blind eye to other various publics who interact with the business in either one way or the other (Sashkin & Sashkin 2003, 33). Many business organizations have found themselves in deep crises just because they stuck to the law but ended up abusing moral standards that are part of the community or nation which they operate in.

The Coca-Cola Company is well known for its aggressive nature of carrying out business and marketing its products with an aim of increasing sales revenues and therefore this hasn’t always rubbed the shoulder of authorities and consumers in certain parts of the world badly (Fowlkes 2002). In the year 1999 the Coca-Cola Company decided to settle channel surfing accusations within the European Union by paying the plaintiffs over $ 120 million.

Channel surfing is a situation whereby a manufacturer or supplier applies undue pressure to make other channel members stock its products. Although the Coca-Cola Company maintained its innocence and claimed that they had done nothing wrong there still remains an ethical and moral question as to how business executives can separate what is right from what is wrong (Fowlkes 2002).

In summary, shows of good business ethics and ethical leadership in the corporate world always end up balancing the needs and desires of shareholders together with all other public or stakeholders within the industry (Hartman & DesJardins 2010, 44).

Therefore, ethical leaders of the corporate world are those who are able to combine commercial ambition that belongs to shareholders and stakeholders and at the same time take care of needs of other publics such as the government, media, community, the business community, future employees and prospective customers by making considerations that are Based on what is right or wrong (Yukl 2001, 72).

The nature of ethics Commercial organizations

Ethical leadership is a must and therefore all organizational leaders should strive to nurture a good ethical culture throughout the organization. The perception of the public towards the degree and level of ethics that is directly related to a particular organization can determine the future direction the organization takes (Hackman & Johnson 2000, 33).

It is therefore the duty of the leadership to make sure that a SCR program is fully disclosed, verifiable, comparative, regular, multidirectional, multi-perspective, comprehensive, and lastly participatory (Gray, Owen, & Maunders 1987, 57). The ethical perspective of an organization is usually assigned in the company social responsibility charter.

Corporate social responsibility is an arm of commercial organizations formed to achieve only one goal that is profitability but instead the corporate responsibility arm of a business puts into perspective the fact that there are needs that emanate from that makes an organization look beyond the fact that various stakeholders who are either direct or indirectly are linked to the commercial enterprises and therefore each and every action and decision that a commercial enterprise takes will have a big impact in its environment.

In lay man terms the corporate social responsibility arm of an international multinational organization is somehow a conscience of the organization.

Accountability is a necessary part of commercial enterprises and the subject of corporate governance has recently embarked on making sure that business executives in the business world today are aware of the fact that businesses can only thrive in the long run if they take the issue of ethics seriously (Kurian 2005, 23-45). The beginning of the new millennium and the 21^st century was marked by numerous corporate debacles in the United States.

Experts and regulatory institutions blamed this problem the lack of ethics and the disregard of the law by corporate executives are was part of the problem, but the truth be said is that when multibillion dollar organizations such as Enron, Adelphia, WorldCom and many others failed or either lost billions of taxpayer money simply because there was some degree of moral deficiency in the American corporate world.

The Rigas family who were part of the Adelphia one of the largest cable networks in the United States is a good example of individuals who took corporate malfeasance to another whole new level. The company board consisting of the father and his two sons together with other officials such as the companies chief financial officer.

The father and his two sons went ahead to spend millions of dollars in personal use by acquiring unnecessary golf courses and executive jets which were not in line with the company’s vision and mission. To cut the long story short is that later Adelphia failed and was declared bankrupt and closed down.

The example above therefore demands that each and every individual who is either directly or indirectly involved in the corporate world, to critically and objectively analyze outcomes that may arise from either adhering or straying from ethics (Cooper 2004, 77).

Multinational corporations operate across many borders and therefore serve a lot of customers’ sand also employ a lot of employees and to add onto this there are numerous publics that are affected by their day to day operations. The term the triple bottom line is a common term that is used while referring to issues that deal with corporate social responsibility, organizations that want to effectively deal with ethics must therefore balance between the planet, the people and people and therefor attain ethical success (Crowther 2000, 32).

The triple bottom line commonly abbreviated as TBL is usually used by an organization to ensure that an all rounded form of reporting occurs within a commercial enterprise. In Japan the concept of releasing corporate social responsibility reports is taken very seriously and when organizations are releasing their financial reports at the end of a financial period they must also release the social reports.

Ethical decision making is not a simple task for corporate leaders who run multinational organizations this is because there are numerous elements and variables that must be factored in before making a business decision.

Stakeholders’ interests vs. shareholders interests may often leave the leadership confused about which decisions will most likely result to the best actions and consequences (The Entrepreneur 1998). However, in some countries in Asia and Europe large companies employ children to work in their plants arguing that the job opportunities that they give them help to put food on the table and cater for basic human needs.

Nike found itself in problems when it was claimed that it employed children in its factories in Asian countries such as Pakistan. While other schools of thought argue that by employing children they save on funds other school of thoughts argue that children should enjoy the benefits of being children and therefore should be free and play and enjoy life (Carmichael 2007, 88-103).

Consequently, therefore there arises a question of how are decisions supposed to be made by leaders in the organization especially in large multinational organizations which operate across many continents. While making these decisions there are four possible types of individual ethical decision making styles that may be used in ethics.

First, there is the individualistic decision maker who is somehow selfish and therefore usually aims to maximize his own gains and therefore makes decisions which will most likely benefit himself, a perfect example been the likes of former Enron C.E.O Jeffrey Skilling who generally made decisions which benefited him but eventually led to the failure and loss of billions to other stakeholders of Enron.

The second type of decision maker is an Altruist. This is a leader who makes the decision without looking at personal benefits which may arise out the decision but rather the benefits that arise out of his decision must be for the good of the society or community involved (Yunus & Webber 2007, 62). The third style of decision making style is a pragmatic decision making style that allows the leader to make decision on the premise of the current environmental situation.

Lastly, there is the Idealist way of decision making which normally allows the leader making the decision to base his decisions solely by following the laid down principles and rules that are put in place. Therefore, by embracing the fact there is no single and unified decision making style and individuals may be forced to follow different paths while making the same decisions and come up with different choices.

Challenges

Although CSR programs may aim to raise the level of awareness, the leadership and the organization as a whole will dedicate towards keeping a close eye in ensuring transparency and accountability mainly via staying in line with ethical decision making.

Furthermore, the fact that CSR programs make sure that companies comply with a legal framework and also adhere to moral standards while operating by laying total responsibility and accountability on the head of corporate leadership out is then therefore important to know that the path towards obtaining a perfect CSR program is not an easy rood but rather a rocky one (Bowie 2002, 15).

It therefore becomes logical to know company’s which have model CSR programs have to go through a lot before they achieve their social accounting and CSR goals, and some of these goals include:

The first challenge is the fact that the conflict of interest between shareholders and stakeholders often leads to confusion among business executives and those individuals who make decisions on behalf of the organization (Drath 2001, 17).

Many investors and shareholders have only one interest in their mind and that is earning a high rate of return on their investments and therefore pressure and push the top management and the board that profits and only profits will be accepted and failure will not be tolerated. Therefore, business executives and top leadership are often confused on whether to follow morality or alternatively break some moral rules but abide by the law in order to achieve objectives.

Experts and numerous media sources on the recent recession of 2007-10, have insinuated that the level of greed that is part of the corporate American culture that was as a result of the demanding nature of investors and shareholders together with the notorious nature of participants of the stock markets to play the share price game, may have led to the recession.

The Security Exchange Commission and other regulatory bodies have since then been advocating for more stricter and tight rules and regulations that would curb the pressure that emanates from shareholders. With this, it therefore becomes even harder for companies to dedicate their time and resources to performing functions that fall far from the main objectives, mission and vision which the shareholders have set for the organization.

The second challenge is while applying principles of ethical decision making it becomes somehow tricky to assess the individual character of leaders and conclude that they may do what is ethically required (Hartman 2006, 33-41). It almost perfectly impossible to measure or quantify ethics at both an individual level and at an organizational level. Furthermore expert’s haven often agreed unanimously on the various elements that are to be included in the final social accounting and corporate social responsibility reports (Kurian 2005, 88).

According KeizaidoyukaI (Japan Association of Corporate Executives), “Japanese companies ranked high by U.S. and European organizations that rate businesses for SRI; it is fair to call environmental CSR one of the strengths of Japanese corporations high in terms of ethics all over the world mainly in Europe and even the United states simply because Japanese culture is not an individualistic but a collective culture” (Hersey & Blanchard 1977, 56).

According to Lavery Principal Consultant, within the CSR network there exists some kind of confusion. Companies are at very different stages and levels of learning, measurement practice and furthermore there is a lack of consensus regarding what should be measured, why and how to quantify some elements of CSR that may be very hard to quantify (Kurian 2005, 66).

Poor legislation has also offered a loophole for individuals the space to behave appropriately, as a matter of fact many individuals in the business world especially multinational companies have legal departments, which scrutinize decisions to ascertain that they do not break the law.

However, many of these departments do not consider or take matters of ethics into note so long us all legal obligations are met on their part. It is therefore up to the government(s) to come up with specific laws that will reduce the probability of unsuitable and unethical happenings I n the corporate world.

An exemplary example of good ethics & bad ethics in multinational companies

Xerox

The ethics movement is sweeping itself amongst the corporate and commercial environment especially in the multinational world a company like Xerox can be used to explain good CSR practices.

First of all the company insists on operating with a corporate charter which insists that Xerox should carry out its businesses process with a view of taking care of stakeholder and shareholder interests (Article base 2010). The process of Greening the supply chain is on such way that the multinational company is able to carry out ethical operations.

As the name Greening the Supply Chain suggests, Xerox is a company that takes the environmental issues seriously and getting rid of environmentally harmful practices by recalling back and replacing parts from Xerox equipment that have already been bought and in the ownership of customers by other new innovations that the company has discovered. The company is able to absorb costs and replace parts of these machineries for its customers at either free or low costs.

The Global Reporting Initiative is a framework that has been developed in order to enable companies account and report their CSR practices by taking a look at how the triple bottom line is adhered to, and therefore companies like Xerox are successfully implementing CSR standards.

Although Xerox may have found themselves in a lot of problems due to various accounting scandals back in 2000 that actually happened between 1997-2000.The entry of Anne Mulcahy as the new C.E.O back in early 2000 helped the company move from being a zero to a hero in issues to do with ethics (Article base 2010).

Siemens

Ethics is not only subjective but also relative and therefore ethical decisions do not only affect a person at an individual level but also affect the society and the immediate environment and therefore leaders in the multinational business field should not be subjective because subjectivism has a rather selfish perspective that looks at benefits that can only benefit the direct owner of the business at the cost of others.

Such is the case with Siemens, a multinational conglomerate with a widened product portfolio ranging from electronic materials to communication support systems and many other products. Siemens was found guilty of subjectivism and was ordered to pay amounts well over $1.6 billion dollars in connection to corrupt practices that run within the company that occurred mainly in the 1990’s (New York Times, 2008).

Corrupt practices in foreign commercial transactions is usually prohibited by American and European law and therefore Siemens having bribed government officials in many countries such as Nigeria and even Asian countries to get tenders was against the law and therefore convicted. Two business executives one of whom was the chief financial officer were later convicted and fined over US$ 8 million in Germany (Ewing 2008).

Staffing and Ethics

Employees are representatives of an organization and therefore they should know that their image also portrays the image of the company and therefore it is very important that the behavior and ethical standards that employee’s exhibit should be unquestionable and lack of blemish (Schuler & Jackson 1999, 100-120).

If a top level manager/director is a drunkard or a wife batterer that his/her neighbors may get wrong perceptions about the company and may therefore end up giving the company very wrong publicity and if such information leaks to the media then the company may face the wrath of the public and therefore have reduced revenues.

The process of acquiring employees is quite tedious and therefore multinational organizations should put prospective employees through rigorous moral and ethical tests in order to ascertain their ethical and moral stand, at the same time individuals of questionable character should be trimmed and removed from the organization (Lynda 1999, 23)

Back in the year 1999 Xerox was forced to sack 40 employees who were found to surf porn during work hours and in its premises, Xerox being a company that has a very strict code of conduct and ethical inclination saw this behavior as intolerable and bad for the image of their company.

There are Global standards developed for social and environmental reports certifications that are related to CSR and ethics and are normally used to ensure social accountability within the workforce. One such example is Standard (SA8000). This is essentially involved with labor and is relates with the need for organizations to comply with national and international labor law.

It spells out the necessities for social accountability to make it possible for a company to achieve some goals such as “developing, maintaining, and enforcing policies and procedures in order to manage those issues which it can control or influence; and to demonstrate to interested parties, procedures and practices are in conformity with the requirements of these standards” (Brown 2005, 127).

It is therefore in line with this that employers can successfully select and filter existing and prospective employees within the firm and retain the most ethical employees.

Therefore, when the companies through its leadership think that they have acquired the best human resources the company can therefore go ahead and develop a training program that is in alignment with its CSR charter.

It will also be important for the organization to ensure that each and every employee knows what is expected of them and let them commit to all ethical guidelines that the company has put in place, it is often good for the company to find various avenues that may be resistant to change and try to persuade all employees to become part of the process (Hersey & Blanchard 1977, 124).

Without inclusive consultation, communication and education the efforts to pull the organization in one direction may prove futile. Furthermore all training programs should always aim to achieve the same end result, which is cultivating and nurturing an ethical culture within the organization.

Conclusion

The role of ethics is a serious concern since ethics and morality is an integral part of the business world and any successful business can testify to this. The need to take care of both shareholders’ and stakeholders’ interests by balancing them without compromising the other is therefore the duty of the corporate leaders and business executives.

Corporate debacles that have recently rocked the corporate world from the likes of Enron, Adelphia and WorldCom among others is enough evidence that if all stakeholders should not sleep, on the job and therefore call for more accountability and transparency among multinational businesses and the world’s largest conglomerates. Business executives often only think about maximizing their own gains and therefore due to poor character orientations may often sacrifice what is considered moral/ethical or good for the general society.

Furthermore, it is the duty of corporate leaders especially those managing multinationals to use rigorous and continuous techniques that will help with the acquisition and retaining of highly ethical employees to ensure success and a win-win situation for all involved stakeholders.

References

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