Business Ethics involve principles of conduct within organizations that guide decision-making and behavior. Here are some principles of admirable business ethics:
trustworthiness, honoring obligations and commitments, visible responsibility as a community citizen, utilizing accounting practices to identify and eliminate questionable activities and being open-minded by continually asking for feedback from internal and external stakeholders. Follow the Golden Rule: "Do unto others as you would have them do unto you."
Firms should strive to engage in social activities that have economic benefits. According to your text, unethical managerial behavior tends to be driven by factors such as "overzealous or obsessive pursuit of personal gain, wealth, and other selfish interests; a company culture that puts the profitability and good business performance ahead of ethical behavior; and heavy pressures on company managers to meet or beat performance targets." Pursuing unethical strategies not only damages a company's reputation; it can have costly consequences.
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Read this: The PepsiCo Code of Conduct/Ethics statement: http://www.pepsico.com/Company/Global-Code-of-Conduct.html
Ethical issues include:
- The search for universal values as a basis for international commercial behavior.
- Comparison of business ethical traditions in different countries. Also on the basis of their respective GDP
- Comparison of business ethical traditions from various religious perspectives.
- Ethical issues arising out of international business transactions; fair trade movement; transfer pricing.
- Issues such as globalization and cultural imperialism.
- Varying global standards regarding the use of child labor.
- The way in which multinationals take advantage of international differences, such as outsourcing production and services like call centers to low-wage countries.
Managers are exposed to different conceptions of ethical behavior and guidelines for socially responsible behavior that impact large multinational corporations.
Ethics becomes an issue across nations because of differing political systems, economic systems, legal systems and cultural values. Acceptable behavior in one nation may be considered unethical behavior in another nation. Ethical issues may arise in international business in the following areas: employment practices, human rights, environmental pollution, corruption, and moral obligations are explored.
Domestic and International managers face ethical dilemmas on a daily basis including: Child labor, human rights, the environment, and plant closings.
- "Ethical Behavior is personal behavior in accordance with guidelines for good conduct or morality. No right or wrong decisions, but alternatives, each of which may be equally valid depending on one's perspective."
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A firm's implementation of Corporate Social Responsibility ( CSR), goes beyond mere compliance and involves "actions that appear to further some social good, beyond the interests of the firm". Stakeholders are resentful of firms that harm rather than protect the natural environment; and appreciative of firms that conduct operations in ways that mend, conserve and preserve the natural environment. Environmental strategies can be embedded into the corporate culture and can include: acquiring or developing green businesses, divesting or altering environmentally damaging businesses and investing in pollution prevention, energy conservation and waste reduction.
- "Corporate Social Responsibility is thepractice of companies going beyond legal obligations to actively balance commitments to investors, customers, other companies, and communities."
- Corporate social responsibility (CSR, also called corporate conscience, corporate citizenship or sustainable responsible business/ Responsible Business) is a form of corporate self-regulation integrated into a business model.
- CSR policy functions as a self-regulatory mechanism whereby a business monitors and ensures its active compliance with the spirit of the law, ethical standards and international norms.
- CSR aims to embrace responsibility for corporate actions and to encourage a positive impact on the environment and stakeholders including consumers, employees, investors, communities, and others.
There are 3 layers of CSR activity:
- (1) company works toward a specific social cause;
- (2) company follows a code of conduct and operates with greater transparency;
- (3) company builds social responsibility into its core operations to create value and build competitive advantage.
Companies pursue "green" initiatives to reduce their carbon footprint and also to reduce operating costs and boost profit margins.
Some of the ethical dilemmas that international managers face include: Bribery and Corruption which leads to the misallocation of resources and damages the integrity of the business relationship.
In 2002, Congress passed the Sarbanes-Oxley Act (SOX), which set more stringent accounting standards and reporting practices for U.S. public company boards and accounting firms.
It was named after sponsors U.S. Senator Paul Sarbanes ( D- MD) and U.S. Representative Michael G. Oxley ( R- OH). As a result," top management must individually certify the accuracy of financial information."
SOX increased the independence of the outside auditors who review the accuracy of corporate financial statements. SOX was enacted as a reaction to corporate scandals that affected firms like Enron, Tyco International and WorldCom which cost investors billions of dollars when the companies went bankrupt.
Strategic Managers must understand the importance of business ethics, environmental sustainability, and social responsibility. Relevant topics include: workplace romance, bribery, pollution abatement, whistle-blowing, and philanthropy. Issues related to these topics can significantly bolster or derail the best strategic plan.
Bribery involves offering, giving, receiving or soliciting any item of value to influence the actions of an official or other person in discharge of a public or legal duty.
Foreign countries often use dumping as a competitive threat, selling products at prices lower than their normal value. This can lead to problems in domestic markets. It becomes difficult for these markets to compete with the pricing set by foreign markets. Dumping is often seen as an ethical issue, as larger companies are taking advantage of other less economically advanced companies.
1. Why is Good Ethics, Good Business?
2. Describe your firm's "Code of Business Ethics."
3. Why should a company encourage Whistle-Blowing? These policies require employees to report any unethical violations.
4. What is corporate stewardship of the natural environment?
Social responsibility involves the company's duty to operate in "an honorable manner, provide good working conditions for employees, be a good steward of the environment, and actively work to better the quality of life in the local communities where it operates and in society at large. Socially responsible actions are taken by organizations that go beyond what is legally required to protect and enhance the well-being of living things.
Sustainability is the extent that an organization's operations and actions protect, mend and preserve rather than harm or destroy the natural environment. The company should pursue an environmental sustainability strategy that "meets the current needs of customers, suppliers, shareholders, employees and other stakeholders in a manner that protects the natural environment, provides for the longevity of natural resources, maintains ecological support for future generations and guards against the ultimate endangerment of the planet."
To ensure that the code of ethics is read, understood, and deployed, companies should conduct periodic ethics workshops to sensitize people to workplace circumstances that may involve ethical decisions. Ethics training programs should include messages from the CEO emphasizing ethical business practices and the development and discussion of the code of ethics. There shuld also be procedures for discussing and reporting unethical behavior.
