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Business ethics Essay

Introduction Today’s world is continually shrinking due to many factors, not the least of which is the rapid growth of international business. Four specific interlinking phenomena are occurring which present new problems to international business: a) the increase in offshore banking transactions; b) the continuing growth of multinational corporations (MNCs); c) the increasing instances of outsourcing business activities offshore and d) the equally increasing instances of locating and using suppliers of goods and services in developing countries.

All four of these phenomena are fueled by economics and they show no sign of abating anytime soon. Two aspects dealt in this paper are: a) the existence of perceived corruption in international business, including graft, kickbacks and preferential treatment and b) workplace conditions that are considered unethical by generally accepted world standards. There are many other aspects of international business which lend themselves to ethical examination, but they are not appropriate here. The approach taken is to examine some of the principal ethical philosophies of the last two hundred years in relation to international business, as follows: a) Immanuel.

Kant’s Categorical Imperative; b) early mercantilist philosophies; c) Distributive Justice; d) Ethical Relativism; e) Integrative Social Contracts Theory; f) Virtue Ethics; g) Confucian and Islamist ethics and h) pragmatic approaches to international business ethics. Then, by way of local comparisons, several local national situations are presented in order to clarify the problem. Finally, in order to address workplace ethics specifically, the SA 8000 Social Accountability standard is presented and analyzed as one approach to remedy a widely recognized situation which required positive attention.

Furtherj this standard is presented as a possible entry point toward developing a customer/supplier dialogue which may hole the promise of formulating a wholly new code of international business ethics, not simply another Western concept grafted onto the developing world. 1 Key ethical theories and concepts Kant’s categorical imperative: Immanuel Kant’s Categorical Imperative has become a mainstay in the study of ethics for the past two hundred years and has stimulated a considerable amount of both support and objection.

His assertion to “act only according to maxims which you can will also to be universal laws”^^ was seen to be in direct reaction to the relativist philosophies being propagated at that time and can also be seen as a defense of free will which was being called into question as well. Marias^^ points out that Kant’s purpose was to personalize ethics, not necessarily to institutionalize ethics. Kant’s ethics describe a “moral person”; not necessarily a “moral society” which is a key point in attempting to apply Kantian ethics to our world. Significant problems have been found to exist not within Kant’s ethics but in its applications.

Calder* perceives the lack of degrees of wrongness in Kant’s Categorical Imperative, stating that this is a major flaw in his ethics. Calder’s interpretation of Kant is that an act is either right ot wrong in a universal sense, not allowing for varying degrees. This would be a valid objection to Kantian ethics were it not for Kant’s intention to personalize ethics and to make the individual person responsible for his or her own actions. In this sense, Kant’s ethics are indeed universal in the sense that each person must decide what is right and what is wrong.

An argument could be made that in this sense, Kantian ethics can be applied universally, but with a less than satisfying sense of having identified a code of ethics that would fit like a sort of template over our world. It should also be noted that at the time Kant lived in the late 18″” Century, our world was just being discovered as highly diverse. European ethnocentrism was still very much in force and the “uncivilized” world was seen generally as a very undefined place.The intertwining effects of the growth of world trade, the rapid increases in colonialism and the onset of the industrial revolution stimulated additional efforts to address the people of the world at large. Early mercantilist philosophy:

The various mercantilist philosophies which emanated from the growth of colonialism and world trade presented a somewhat different viewpoint to (11)Advances In Management Vol. 5 (3) Mar. (2012) ethics. In the minds of the mercantilists, civil society would contain markets which would be self-regulating’ and government, business and nonprofit organizations would unite to create social accountability systems which would contain self-enforcing codes of conduct reinforced by the concept of shareholder and stakeholder pressures.

These concepts tend to continue to the present day in many business textbooks. However, these early mercantilist philosophies, propounded in the heyday of expansionism by the world’s trading nations, pointedly did not consider what effects mercantilism would have on the rest, of the world. These mercantilist philosophies provided a basis for the development of utilitarian ethics which would become popular in the following century with the writings of Jeremy Bentham and John Stuart MilP^ and which would eventually become the unofficial political philosophy of the British government throughout the colonial years and up to the present day. Distributive Justice:

The rapid growth of complex economic systems together with the “shrinking” of the social world gave birth to the concept of distributive justice. The concept has its origins in David Hume and John Locke and continues today in the writings of modern philosophers John Rawis and’ Robert Nozick. ^’ The internationalization of the world economy has further spurred discussion concerning how distributive justice might be applied to international business.

Unlike the ethics of early mercantilist philosophies and classical utilitarianism which both fit uneasily in the world of international business, there has been quite a lot of discussion concerning the ethics of distributive justice in this context. The principal questions tend to revolve around how (or whether) gains from international trade get distributed both within and between countries’* and whether or not basic human rights are observed in the practice of international business. ” This second question has also been expanded to discuss whether international business as a function has the obligation to offer help to the inhabitants of developing countries within which they do business.

Both concepts would seem foreign to the mercantilists and would pose awkward questions to the utilitarians. Ethical Relativism: The next logical stage of development in the thinking of international business ethics was termed ethical relativism.

To put the best face on it, this concept developed as a realization of the multifaceted cultural and social nature of today’s world and of the inherent difficulties today’s international business person experiences in attempting to deal with these differences. ^^ However, as many authors have pointed out, ethical relativism can be seen as moral approach to business, using cultural differences as an excuse to practice unethical behavior which might not be acceptable in one’s own society. ^”

The ethical relativism stage of international business ethics exists but does so in a weakened position due to criticisms leveled against it. Integrative Social Contracts Theory: An effective response to ethical relativism in international business has been a blending of ethical relativism and universally recognized ethical principles – at least universally recognized in the Western world – into a concept that has become known as integrative social contracts theory (ISCT).

-^-* Under this concept, certain universal ethical concepts would provide the basis for an ethical code of conduct for international business with the recognition of the validity of certain local ethical practices with the provision that in the event of conflict between the two, universal ethical principles would take precedence. This blending of ethical concepts satisfied most participants in international business activities but not all. One criticism leveled against ISCT is the problem of using empirical methods to discover and define what the authentic norms of a particular culture might be’^.

The approach taken by most ISCT practitioners lays open to question the overall effectiveness of a purely empirical approach, subject as it is to misinterpretation and lack of complete knowledge and understanding. As a result, critics of ISCT tend to call for a revival of the universal ethical principles that ISCT has largely replaced, causing discomfort particularly in the developing world which has never been completely comfortable with espousing the universal ethical code of former colonizing powers. Virtue Ethics: One possibility of a usable ethical code is the application of virtue ethics to international business.

This concept would formulate ethics based on the moral character of the people involved in international business. Clearly, virtue ethics appeals to those who wish the “right thing” to be done consistently” and studies have attempted to apply the concept to the international business arena. ‘”* Virtue ethics has also been proposed as a tool that international organizations could use to fight corruption. ‘ Nonetheless, it remains undeniable that virtue ethics is grounded in one’s own culture and moral beliefs and would necessarily provide a weak tool to formulate any sort of international business ethics code.

Confucian and Islamic ethics applications: One has only to look at the major cultures of the world to discover old and well developed codes of ethics. One such ancient culture – China – has adhered to Confucian ethical concepts for centuries. Magee^”* notes that philosophy, including ethical thought, proceeded in China unhindered by established religions, as was the case in the West and therefore developed a thoughtful ethical philosophy deeply seated in Chinese culture. Yew Chan^*^ points out that while most Confucian ethical thought parallels Western ethical thought, there are some significant divergences.

Interestingly, one of the principal differences from the Chinese point of view has to do with the West placing results ahead of ethical concerns. ” Also, the importance of social harmony which takes on a characteristic of ethics in Confucian culture is emphasized in China while downplayed in the West. ‘ (12)Advances In Management Vol. 5 (3) Mar. (2012) Another old and well established body of ethics is found in the Middle East, northern Africa and southeast Asia in the ethical traditions of Islam.

The Islamic tradition highly values such concepts as trust and benevolence and makes a major point of including justice and social balance in its code of ethics. ” Most of these concepts have their basic roots in pre-Islamic Arab culture based in turn on Bedouin culture, but they are reinforced by both the Koran and Sharia. Pragmatic approaches The various conflicts resultant from culture meeting culture in the international business world and the typical result of developed societies coming out on top (with the notable exception of the international petroleum industry) has generated a movement termed the United Nations sustainable development initiative.

^’ This convergence of business, political and ethical concerns and interests is the most recent attempt to “make things right” in the international business world in the face of increasing world poverty and hunger and undeniable global inequality. The most recent ethical solution proposed to begin to set things right internationally is called the “language of rights”. ‘*,This solution which flnds its roots in distributive justice, identifies the multinational corporation as one of the principle change agents and focuses on the capabilities of all concerned rather than on finding blame.

The emphasis is on denning and promoting the positive rights of all concerned. International Business Applications From a practical point of view, however, all of these concepts are somehow found wanting. The realities of wide chasms between the developed world and the developing world – which in many instances is not developing at all, relatively speaking – tends to make nonsense of any attempts to formulate and superimpose any sort of universal ethical code on the whole world.

In the old days of colonialism, the Western powers and Japan simply took what they wanted through dint of force and in the present day of neocolonialism these same powers – in the persons of international business – carry on that tradition in an updated manner.

Appeals to “post-conventional moral reasoning”‘”, in efforts to induce multinational corporations to develop mature corporate ethics in dealing with developing countries, have met with mixed results. Claims of widespread corruption in international business has stimulated a considerable amount of activity both in academia and in international organizations,” although strong arguments have been made that bribery and corruption are not cultural characteristics, as they have so often been called, but symptoms of cultural breakdowns under the pressures of a malfunctioning economy.

The local gift-giving customs in some cultures has been thoroughly examined and seem to be finally recognized as local custom and not necessarily as a form of graft. ^ One viewpoint sparsely practiced in the search for some resolution of the international business ethics conundrum is viewing business practices from the perspectives of other cultures.

Both Confuciani. st and Islamic ethical systems were very briefly noted above and cases drawn from the business experiences of people from a few speciflc countries are now examined by way of comparison in order to better understand the cultural diversity in today’s international business environment. Post-apartheid South Africa presents an interesting case study as the only developed economy on the African continent and as the principal trading partner of many African countries. South Africa also presents a model for global multinational corporations in how to deal effectively with developing economies. ^”

Through a mixed strategy of business promotion and social involvement in these countries and by limited political involvement with government ministries. South Africa has developed a favorable reputation throughout most of sub-Saharan Africa by remaining pragmatic in dealing with local custom. Within that region, Nigeria has developed a version of virtue ethics based on a communitarian notion of ethics which seems to work well for Nigerian businesses. ‘^^

Considering that Nigeria is the most economically successful of the black sub-Saharan economies and is the dominant force in West Africa, this application of communitarianism is having a positive effect on its culturally similar neighbors and holds out hope for a type of regional ethical code in business. The case of Jordan, a relatively poor country located in the Mashriq area of the Middle East, shows mixed results when business ethics are examined. ‘

Similar to other countries in the region, Jordanian businessmen tend to bend their ethical activities toward what is practical under the pressures of reality which makes them not much different than other businessmen throughout the world. However, the active effect of Islamic ethics, as previously noted, has an ameliorating effect on Jordanian business practices.

India presents a more interesting ethical picture. ‘^* While being largely Hindu in religion with significant minority groups, India is a country comprised of people speaking twenty-six different languages within two large ethnic groups. To consider India as a single culture through which one can examine Indian business ethics would be completely misleading.

As a result and considering the existence of “under cultures” throughout the Indian population, international business performed in India would need to carefully examine the various ethical codes in practice throughout the country in order to understand the culture and begin to apply any sort of integrative social ethical theory. Finally, Australia presents another interesting case study. Australia is a large country – approximately the same (13)Advances In Management Vol. 5 (3) Mar.

(2012) size as the forty-eight contiguous states in the United States – but with the total population of not much more than Los Angeles and Orange Counties in California combined. Rich in natural resources but isolated from the rest of the world by geography, Australia finds itself an essentially Asian country but with a European political, social and cultural tradition.

As a result, Australian businessmen have had to learn how to do business with Asian cultures not by choice but of geographic necessity. ^’ Adjustments to doing business in Asian cultures has always been a problem for the Australian businessman, particularly when faced with unfamiliar or uncomfortable ethical situations. ‘^ As a result, Australia can be seen in this sense as a microcosm of what international business people face. Social Accountability International As described above, the applications of ethical codes to international business have been spotty at best.

The reasons for this are varied, but seem to have a great deal to do with attempts to formulate universal ethical principles, albeit with the effort to formulate ISCT in order to accommodate at least some local cultural practices that might affect business ethics. A major reason behind this failure may very well be that the various attempts have all been based on Western philosophical thought. Both Confucian and Islamist traditions possess functioning and effective ethical codes which seem to work well in those cultures.

In 1997, Social Accountability International (SAI) published Social Accountability 8000, a voluntary standard that attempts to ensure humane workplaces worldwide. The standard was revised and updated in 2001. Rather than using the exhortative approach attempted up until that time by the International Labor Organization (ILO), SA8000 is a frank, open attempt to convince companies that it would be in their best business interests to become registered to this standard.

It is based on international workplace norms of ILO conventions, the Universal Declaration of Human Rights and the United Nations Convention on the Rights of the Child (saintl. org). It is an auditable certification standard and those companies which pass an initial audit and which also maintain compliance through successful semi-annual surveillance audits are included in a published list of SA 8000-registered companies. Audits are conducted by thirdparty auditing organizations accredited and overseen by Social Accountability Accreditation Services (SAAS). ^’

Provisions of SAAS a) Child labor: No workers under the age of 15; minimum lowered to 14 for countries operating under the ILO Convention 138 developing-country exception; b) Forced labor: No forced labor, including prison or debt bondage labor; no lodging of deposits or identity papers by employees or outside recruiters;

c) Health and safety: Provide a safe and healthy work environment; take steps to prevent injuries; regular health and safety worker training; system to detect threats to health and safety; access to bathrooms and potable water. d) Freedom of association and right to collective bargaining: Respect the right to form and join trade unions and bargain collectively; where law prohibits these freedoms, facilitate parallel means of association and bargaining; e) Discrimination: No discrimination based on race, caste, origin, religion, disability, gender, sexual orientation, union or political affiliation, or age;

No sexual harassment; f) Discipline: No corporal punishment, mental or physical coercion or verbal abuse; g) Working hours: Comply with the applicable law but in any event, no more than 48 hours per week with at least one day off for every seven day period; voluntary overtime paid as a premium rate and not to exceed 12 hours per week on a regular basis; overtime may be mandatory if part of a collective bargaining agreement; h) Compensation: Wages paid for a standard work, week must meet the legal and industry standards and be sufficient to meet the basic need of workers and their families; no disciplinary reductions;

i) Management systems: Facilities seeking to gain and maintain certification must go beyond simple compliance to integrate the standard into their management systems and practices. ‘” The SA 8000 standard is a rather obvious carrot-andstick approach to flght the more blatant workplace abuses by creating a type of international “honor roll” of companies which have successfully undergone certification. Its introduction was greeted by a mixed reception”’^ amid fears that it was just another expensive piece of bureaucracy. However, within a few years the value of the SA 8000 standard was becoming apparent.

‘” Further, studies have shown that successful implementation of this standard as well as other similar standards have had the effect of improved international business in developing countries. ” The SA 8000 approach admittedly does not address ‘ all ethical concerns inherent in international business but it does address what can be considered the heart of the problem by attempting to bring workplace conditions in line with generally accepted international standards. As discussed, the issues of corruption in the exercise of international business are being addressed in part by the application of cultural

ethical standards, such as Confucian and Islamist practices and the more heinous practices have been so roundly (14)Advances In Management r Vol. 5 (3) Mar. (2012) condemned that they are either fading away or have been made well-publicized examples throughout the world. The hope is if workplace conditions can be brought up to an acceptable level, then the concept of discourse ethics can be put in play under which multinational corporations in partnership with their developing country suppliers can provide a theoretical justification for opening and maintaining a moral discourse which can then establish and mutually maintain ethical principles based on agreement and cooperation. ‘^

This would be a truly revolutionary development and one which would create a wholly new code of international business ethics involving the customer and the supplier as cooperating partners. Conclusion In the wake of Enron, Tyco and other recent scandals which have severely shaken the public’s faith in our business leaders, corporate social responsibility (CSR) has emerged as a serious topic of discussion in the business world. ^°

In addition, the popularity of such recent and graphic films as “Lord of War”, concerning arms dealing in Africa, “Blood Diamond”, also concerning this topic in Africa and “The Constant Gardener”, concerning corruption in the international Pharmaceuticals trade and once again in Africa, has raised the public’s awareness of business corruption in developing countries.

In addition, the rapid movement by Western companies to developing countries as a source of supply based on cheap labor has accentuated the previously “invisible” problem of working conditions in these areas. ^* Recent health threats concerning tainted pet food and leadbased toys from the People’s Republic of China (PRC) have served to magnify the situation.

American consumers, once complacent concerning the products they bought as long as they were cheap and worked, are becoming more concerned with the quality and inherent safety of these products and a connection seems to have been made in the public’s mind with workplace conditions in the countries of origin. The challenge is to keep these issues out in the open until they are resolved. ‘

The success of the SA 8000 standard is a good beginning toward instituting a true international discourse which has the potential of creating a new international business code of ethics which all people can buy into and follow – a code of ethics which was not exported from developed countries, but one that would truly be an international code of ethics developed in partnership between customer and supplier.

Such a mutually developed code of ethics would be-much more easily understood, would stand a much better chance of acceptance because the subjects would also be the formulators and would therefore offer a significantly higher chance of success. References 1. Al-Shaikh F. N. , The practical reality theory and business ethics in non-Westem context: Evidence from Jordan, The Journal of Management Development.

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