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Can ethics be Managed in Business world?

I don’t agree with the belief in business that ethics cannot be managed. I cannot imagine a relationship between an employer and the employee will work progressively and actively without the presence of the moral aspects. One of the most common problems in business world where later some people would reason out that ethics cannot really be managed are: respect, lack of duty and the constant applying of these two prior principles. I think people really need to develop these three aspects so that they could experience the presence of morality in their lives, especially in dealing with other people. The aspects that we need to develop are; the sense of respect for/with the other person, sense of duty and the last is the sense of constant applying of the two principles from the prior point.

Now, the sense of respect for other person is one of the most important aspects in developing a healthy relationship between the employer and the employee(s). I could still remember what my father would say that even if you are in other places, if you have respect for other people, surely, you cannot find any troubles with other people around you. However, this is very difficult to apply especially in the side of the employer because of this sense of pride. Sometimes the employers are so close minded  to the point that they will no longer showing any respect because they have this pride that they are the boss and the master and respect is not necessary for them to give. This one of the reasons why people would end up saying that in business, ethics cannot be manage because they forgot the sense of respect to the other people.

The second aspect that a person needs to develop in order to feel the presence of morality in the business world is to be aware of his sense of duty. Allow me to use Immanuel Kant’s philosophy regarding this sense of duty. According to Kant, we must not use or treat other person as a means but and end. The end here refers to the nature as human being that should be valued in all times. This is one of our duties as human being. Now, putting this concept in the business world, some of the employees are thinking that we cannot use ethics in business because for some of them, they are not treated as what they deserve to be treated. Many employers are demanding a lot of work without considering the limitations of their workers, we need to emphasize clearly that they are not machines and that their being is more than a machine. This duty is not a subjective principle varying only on some people; rather this is a universal rule to be followed in order to acquire a vigorous business system.

The third and the last aspect a person need to develop is the sense of constant applying of the prior principles. This would be so funny but I do believe that this is one of the problems in business world. Some of the people are just doing the right things (e.g. respect and duty) only at the beginning and stop afterwards. Now, we have to be constant in doing the right things so that in return, the people around us would also be constant in treating us good. In terms of respect, we need to be constant of this act and not just choosing the people to whom we need to be respected.

To end this argument against one of the myths in business ethics that would state that ethics cannot be managed, I would like to be transparent to the idea of why this things are happening in our society and why things situations still happening nowadays. One of the reason I have sighted base on some facts about our attitudes as human being is that some of us are not willing to give way to other people. We just think about ourselves leading to a selfish action towards others. I think that is one of the reasons how other people get the notion that ethics cannot be managed. The fact that we need to consider is that it is not true that ethics cannot be managed; it is only a subjective point from some people who refuse to follow the maxim because they are just concern with their self.

 

Business Ethics, Moral Authority and the Schools – The Curious Case of Business School Blindness

If ain’t broken, don’t fix it – If it is broken, fix it!

Here is some old news: We have to do a better job detecting business scams. Here is a little more old news: We can’t trust anyone close to a potential scam to warn us — because they won’t. And it won’t matter that they are the alumni of our very best business and law schools.

Whether it was Enron, Bernard Madoff or the sub-prime mortgage fiasco, the personal and financial havoc they wrought was almost incalculable. Remarkably, nobody stepped in to intervene until after the major damage was already done. Our finest and brightest simply looked the other way…

These scams have therefore highlighted the two greatest ethical crises our business world faces — the crises of (a) pervasive cheating and(b) people watching and doing nothing as those around them cheat. These crises also served to highlight the curious case of the blindness of our business schools as they continue to rely upon discredited folk theories as they continue to churn out generations of skilled scammers and those who look the other way.

The first of these discredited folk theories — and the one that is most often used to argue against the introduction of ethics courses into our business schools — is that morality is a matter of character and that, by the time students enroll in business programs, it is too late beause their values have already been formed and the die has been cast. They conclude that ethics courses are therefore effectively a waste of time. The second of these discredited theories tacitly accepts the first, but argues that it is still possible to improve character.

The business schools have failed us…

In addressing these crises, the business schools have had no impact. And before we listen to the howls of protest from the deans, we should perhaps allow the facts to speak for themselves…

As the schools have attempted to make their students more sensitive to ethical issues to prevent future scams and cheating, business students engage in more academic dishonesty more than other students. Cheating within the business schools remains pervasive. And as business students cheat, their fellow students and the faculties stand by and look away. There is no dispute that very few of those who cheat get caught. What this suggests is either the schools’ inability or unwillingness to do anything about the cheating. So, if the schools can’t address the same crises that the business world faces, how can we expect their alumni to address these crises either effectively or at all as they enter the work force? As recent scams confirm, we can’t…

Perhaps one reason for the schools’ failure in addressing the crises is that some continue to use discredited folk theories of motivation in their approach to the problem. Another reason is that they are focusing on the wrong problem. This might explain their inability to act as a role model to the business communities they are serving.

A starting point…

Although the schools regard the high-profile scams as primarily ethical scandals, they are actually much more. They also represent a serious outbreak of high-level white-collar crime. To prevent future similar white-collar crime, criminologists argue that the focus must be on how to reduce the chances that business students will become white-collar criminals. Instead, the business schools have chosen a different focus, namely, how to reduce the chances that their students will act unethically. These are different, yet related, approaches…

The business schools focus on moral dilemmas. As they teach their students the fundamental perspectives of Kant or Utilitarianism, they ignore the fact that the scammers were faced with no moral dilemmas. They thereby ignore the criminologists’ argument that people do not commit crimes because they lack expertise in the application of Kant or Utilitarianism. The criminologists point out that white-collar criminals know what the law and morality requires of them, yet still commit crime. So, what motivates them to do so?

What criminology literature reveals…

Criminology literature reveals that moral motivation is neither about character, nor about values. Instead, it is about the situation in which people find themselves — and how they perceive that situation. As what they perceive others think about the situation they are in and what is acceptable…

In business, it is the organizations we create and manage that create those situations. Particularly in large bureaucratic organizations, we often create a subculture that isolates employees from the broader community. This can become a breeding ground for unethical and even criminal behavior. Criminologists would argue that unless these organizations create an institutional environment that will promote ethical non-criminal conduct, we could not expect ethical and non-criminal conduct to result.

The leaders of those organizations must therefore step up and display some moral authority. They must unambiguously state that the organization will not accept excuses or techniques of neutralization that are available to employees to excuse criminal and unethical behavior. And if the business schools are not teaching this, they should — both with respect to how students conduct themselves in school and out of school.

What discrediting the folk theories means…

Because business schools and business managers can no longer rely on the first discredited folk theory, they can no longer simply shrug their shoulders and claim that cheating is not their problem because it is ”too late” to do anything about ethics.

This would also force them to address the criminologists’ contention as to why people are more likely to commit white-collar crimes. They believe that these people they have talked themselves into believing in some type of excuse for their actions — particularly where the excuses have a supportive environment and a peer group exists who are also inclined to view these excuses as legitimate.

The argument, therefore, is to attack the excuses or techniques of neutralization that students are likely to encounter, and may be tempted to employ, both at school and when they go on to their future careers. The business schools’ responsibility is to demonstrate the inadequacy of these excuses so that students will be less likely to accept them when they encounter them in the work force. Whether or not the schools will discharge this responsibility is for them to decide. At the moment, many are not…

Where this inevitably leads is to an examination of leadership and moral authority — both for the business schools and the larger business community — and a commitment to discard the discredited folk theories that have resulted in the business schools a path that has led nowhere…

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Ethics, Student Cheating and the Business School Deans: How Looking Away Is Not A Badge of Honor

The questions not asked

Every new corporate scandal brings with it a new wave of public hand-wringing and outrage. The financial media will always ride in on their white horses to confirm what we already know. They will tell us how unethical conduct by employees significantly impacts business in the United States. A typical business, they will tell us, can lose up to six percent of its annual revenues to employee fraud. Overall, employee misconduct will cost our businesses more than 0 billion annually. The stakes are enormous, they will tell us – and they are correct.

The financial media will also always point to management flaws and ethical lapses of the company’s leaders. They will refer to the moral bankruptcy of those who did not expose the dishonesty. They will always shine a light on the lack of moral authority of those leaders who didn’t lead by example. And as they continue to enlighten us, all we will know for sure is the questions they will never ask. For example, they will never ask -

What responsibility they have for the carnage they have just described?
Was it just a strange coincidence that the percentage of college and university students who cheat at school is about the same as the percentage of employees who engage in misconduct on the job?
Why do business students (graduate and undergraduate) cheat more than others?
Why would we expect morally bankrupt students who cheat at school to stop cheating when they graduate?
What are the business schools doing about this?

 

What the surveys show

According to studies and surveys, it is indeed true that the percentage of college and university students who cheat at school is about the same as the percentage of employees who cheat at work. For all the reasons the financial media has already shared with us, this is enormously significant as is the fact that, if our future business leaders believe that cheating is not a serious issue, can they seriously be expected not to cheat themselves when the opportunity presents itself in the larger marketplace once they have graduated?

What should particularly attract the attention of the business school deans, however, is that, according to surveys over the past 15 years, the problem is pervasive amongst business students – our future business leaders.

What is quite remarkable about the following statistics is that the business school graduates who were working at Enron and other scammed companies in the mid-1990s cheated in school at the approximately the same rate as those who came under closer apparent scrutiny in the aftermath of Enron when the schools were challenged to bring a greater sense of ethical propriety to new generations of future business leaders. In fact, according to these surveys, the level of cheating actually increased in the post-Enron days.

In a 1995 study of graduate business students, 81.2% admitted cheating.
In a 2001 a study of undergraduate management majors, 96.7% admitted cheating.
In a 2004 study of undergraduate business majors, 88.7% admitted cheating.
In a 2009 a study of undergraduate management majors, 100% made this admission.

How did the business school deans view this shocking admission of pervasive cheating by business students? In a recent survey of business school deans, 78% of the deans believed that fewer than 40% of their students engaged in cheating. How does one explain this huge discrepancy in the amount of cheating as admitted to by the students and as perceived by the deans other than in terms of “self-delusion” of the deans?

Assuming we accept the deans’ lower number and assuming over half the business students who admitted cheating actually did not cheat, we are left with an astounding one-in-three business students cheating. Isn’t this still a chilling statistic and a serious problem worthy of immediate and urgent attention? How would the deans react to this?

Based on the recent survey, the vast majority of the deans were unconcerned. Only 5.1% of the deans regarded cheating as a very serious problem and just under 30% said it was either a slight problem or not at all a problem. 48.3% of the deans regarded it as moderately serious. Their subsequent actions were consistent with their view of the seriousness of the problem.

And what about the financial media who had all of the same statistics and facts at the fingertips? Has anyone noticed even a single story in which the deans are even asked about what they are doing to eliminate this pervasive cheating?

 

The enormous responsibility of the business school deans

The deans of our business schools are tasked with an enormous responsibility. They somehow have to imbue in our next generation of business leaders the ethical standards that were so lacking in those who represented and advised companies like Enron and the financial institutions at the heart of the sub-prime mortgage crisis. All that was clear was that the schools had failed miserably in imbuing these ethical standards in their students.

In my book, Detecting the Scam: Nelson Mandela’s Gift, a recurring theme is how, when some of our finest and brightest (many of whom were graduates of the best business schools in the country) had to choose between integrity and financial gain, too often they looked away and abandoned integrity too easily.

Similarly, unlike the recurring theme of Nelson Mandela’s life in which he always put the interests of those he represented ahead of his personal interests, when many of our finest and brightest had to choose between their personal interests and the interests of those they represented, too often they chose their personal interests. Why was this?

There were some who always suspected that our schools had dropped the ball. As the dust was finally beginning to settle on the Enron implosion, Texas A&M’s then-President, Robert Gates, now Secretary of Defense, offered a breath of fresh air to the discussion. At last, someone would acknowledge that the universities were at least partly to blame and had to take responsibility for the values and actions of their graduates:

All of these liars and cheats are graduates of our universities. The university community cannot avert its eyes and proclaim that it is not our problem, that there is nothing we can do, or that these behaviors are an aberration from the norm.

 

So how have the business schools responded?

Apart from some schools introducing mandatory ethics courses for freshman and honor codes, what emerged from the aftermath of Enron is a curious but typically-academic internal debate at the schools. The debate continues today as to whether ethics should be taught in a specialized course versus integrating ethical analysis throughout the curriculum. And as the debate continued, surveys suggested that student cheating continues unabated. If the students were cheating in those same ethics classes, would this surprise anyone?

As for the Honor Codes that the deans felt so proud about introducing into their schools, I was reminded about Enron’s remarkable 64-page Code of Ethics that was personally crafted and then ignored by Ken Lay.The inescapable inference was that, unless the leaders who installed the Codes of Ethics and Honor Codes demonstrated by example that they would tolerate no deviance from the standards laid out in those documents, the documents would become totally meaningless. Put differently, if deans came out clearly and unambiguously against student cheating and then followed through with a zero tolerance policy, does anyone doubt that this would have a greater effect on student cheating than the present do-nothing alternative?

A growing perception is that many of the deans of the business schools are ineffective because many appeared to lack any moral authority as leaders. Because few of the deans treat the problem of cheating as a serious problem, the students themselves don’t view cheating as a serious issue. And why is this a clear and present danger to our economy and society? As the deans of business schools turn and look away when confronted with ethical issues, students will do the same. As the schools continue to turn out graduates for whom systemic academic dishonesty has become the norm, this could have a devastating effect on our economy and society. The stakes are therefore quite high.

 

How to get this back on track

If the issue with which every business school should be concerned is moral authority, leadership by example, ethical business and negotiating practices, and the courage to confront those with hubris who are demanding unethical behavior, surely the deans should require their students to study the man who is regarded as an icon around the world for these qualities and skills?

Surely, if the issue with which every business school should be concerned is to avoid the scams that have plagued us in recent years, those scams should be studied through the lens of the same man? What we have done and how would he have handled those situations?

Despite this, few deans appear to have any knowledge or appreciation of Nelson Mandela. Few seem to understand that his life represents the very values so lacking in our failed business leaders and their advisors. How can these schools teach moral authority without studying the man who epitomizes it?

It was the late Justice Potter Stewart who commented that to act ethically is to know the difference between what you have the right to do and what is the right thing to do. The single greatest failure and lesson arising from the Enron and other recent high-profile scams is that graduates of our best schools refused to act the critical question: Was what they were being asked to do, the right thing to do?

Until the deans of our schools themselves have studied Nelson Mandela, they will never become leaders with the moral authority necessary to get our young students back on track.

 

Finally, the Subway Test

Finally, in my book, I have offered the following hypothetical that also demonstrates the ethical dilemma facing the deans. I have called this the Subway Test:

Suppose you are in a subway tunnel. Someone approaches you and offers you a watch that resembles a well- known designer watch that costs ,000 in the stores. It looks exactly like the real watch, but it doesn’t feel like one. It is as light as a feather. He wants for the watch and you buy it as a joke. Have you been scammed? No, not even close. You simply bought a fake watch knowing it was fake.

But here is more interesting question:

Assume your friend wants to borrow your fake watch. He’s having dinner with a prospective investor who you happen to know. When your friend learns that you know the potential investor, he invites you to the dinner. You accept. At the dinner, your friend proudly shows the prospective investor his new watch and tells him how you and he bought the watch together at a high-end jewelry store. You know he’s trying to impress the prospective investor that he’s someone of substance. The prospective investor is impressed, because he knows that the particular model of that watch costs more than ,000. As the prospective investor looks at you, you turn away and say nothing.

Here is the question: Approximately how soon after you have looked the other way and said nothing have you become a member of the scammer class? In my world, the answer is clear: “Approximately immediately!”

Sitting in their ivory tower and seeing that a large percentage of their graduates engaged in significant academic dishonesty, what are the deans to do? Do they say and do nothing? And if this is their path of choice, approximately when do they become complicit in the damage their graduates are about to wreak? In my world, the answer is clear: “Approximately immediately!”

And what about the financial media who see this going on and who choose to take the easy path and say nothing? Approximately when do they become complicit in the damage the deans and the graduates are about to wreak? Again, in my world, the answer is clear: “Approximately immediately!”

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International Company and Ethics

International Company and Ethics

The issue of business ethics is engaging companies more and more – both domestically and internationally. This trend is accentuated by high-profile examples of breaches of accepted standards of ethical behavior. For example, the recent Enron case where inadequate checks and balances within the firm enabled unethical behavior to occur, a development made easier by the failure of the external auditor to fulfill its role properly. Assumptions about ethics and business are influenced inevitably by fundamental beliefs about the role of business in society. On the one hand, there are those who believe that the sole social responsibility of business is to generate profit. For some proponents of this view, profit generation itself takes on a moral dimension whereas others see profits as the key to wealth generation – the main way of addressing social issues (Davies, 1997, p. 88). On the other hand, others believe that the role of business is much broader than that of profit generation and that all those who are affected by the way a company operates – shareholders, employees, customers, suppliers, the local community, future generations (especially in relation to environmental issues) – have a legitimate interest and stake in the way a company conducts itself.

Many of these concerns are relevant to business whether it is domestic or international in nature. However, international business poses particular challenges and questions over and above those facing purely domestic business. In order to reconcile doing business internationally and remain ethical, the company should follow the main principles of human rights, comply with legal norms related to labor, avoid corruption and correspond to standards of environmental protection. Even though it is not easy to combine making profit and adjusting to ethical principles, sometimes failure to comply with legal norms and standards my result in negative public image for the international company and loss of customers. Therefore, international company can suffer even more damages if it decides not to follow the ethical principles.

The first issue related to ethics is human rights. It is a generally accepted principle that international company should not engage in direct infringement of human rights the UN Universal Declaration of Human Rights (UDHR) is commonly taken as the appropriate benchmark. However, some people would go further, preferring companies to refrain from doing business in countries known to infringe human rights on a systematic basis. Opponents of this view argue that if an international company abstains from conducting business in a country with an ethically dubious regime, the only concrete result is to hand over business opportunities to companies without such reservations (Barlett and Ghoshall, 1998, p. 110).

On coming to office in 1992, for example, President Clinton proposed to withdraw MFN status from China as a result of the Tiananmen Square massacre in 1989 in which many pro-democracy demonstrators were killed (Kepstein, 2001, p. 108). Such action would have provoked retaliation against US companies operating in China and US business lobbied hard to persuade the president to change his mind. They argued that US business interests would be irrevocably damaged in a rapidly growing market and that the outcome would not be an improvement in human rights in China but a boost to the business prospects of American business rivals in China. The lobbying campaign was successful: the link between trade and human rights was broken and replaced by the doctrine that the possibility of bringing about change is greater if business and other links and contacts are maintained.

International labor issues can be linked with human rights, especially regarding matters of forced labor and child labor. Ethical labor issues also occur outside the framework of the Universal Declaration of Human Rights in circumstances where certain labor practices may be legal and commonplace in the host country but do not necessarily represent fair and equitable treatment of the workforce. The issue facing an international company is: does it maximize its competitive advantage by locating in a low-cost/low-regulation country and adopt local practices or does it refrain from reaping all the labor cost benefits by adopting higher standards and more ethical practices than strict compliance with local legal norms requires? A firm may choose to take the latter path and still experience significant competitiveness gains.

Corporate codes of conduct governing general corporate behavior and treatment of the workforce in particular are not new. Their modern manifestation began in the mid-twentieth century in the form of codes from the International Chamber of Commerce and other collective codes (Donaldson, 1989, p. 55). Their popularity surged once more in the 1990s in response to pressure from NGOs, the emergence of corporate social responsibility as a key consideration for firms and the phenomenon of socially responsible investment and shareholder action. Additionally, discussion of the possible inclusion of labour regulation under the WTO umbrella encouraged international firms to assume greater responsibility for their own labor standards, if only to demonstrate that international regulation was unnecessary. Corporate codes of conduct take many forms. Many international firms have developed their own individual codes to cover their own employees and those of their contractors and suppliers. Some industries have developed their own codes. Whatever form they take, codes are necessary for the positive public image of international company and they demonstrate that the company reconciles doing business and acting ethically. Codes need to comply with a number of conditions before they can be said to operate equitably and with credibility (DeGeorge, 1993, p. 88):

1.the contents of the code must be clearly worded and, at a minimum, comply with core standards;

2.the company adopting the code must be committed to it and be prepared to provide the resources to ensure its implementation, including training, information systems for monitoring and compliance and staff to implement new procedures;

3.knowledge of the code throughout the organization is essential to its implementation: in particular, employees of the firm and its subcontractors and suppliers must know of the contents of the code and a reporting system must be established that enables workers to report infringements without fear of reprisals;

4.the code should be subject to verification by independent assessors who have access to the site unannounced at any time.

The application of such codes can enhance internal governance and facilitate internal management across geographically dispersed sites. There is some evidence to show that real commercial benefits can be gained from the proper application of fair and equitable labor standards, although more widespread research needs to be done on this (DeGeorge, 1993, p. 111). Provided the code of conduct adopted by a firm has external credibility, it can both protect and enhance a firm’s reputation, particularly important these days when more is expected of firms in terms of corporate social responsibility.

Levi Strauss is one of the world’s largest brand-name clothes manufacturers and also one of the first international companies to adopt a corporate code of conduct to apply to all contractors who manufacture and finish its products and to aid selection of which countries in which to operate (DeGeorge, 1993, p. 118). The Code of Conduct has two parts:

1.Business partner terms of engagement: Levi Strauss uses these to select business partners that follow workplace standards and practices consistent with its policies and to help identify potential problems. In addition to meeting acceptable general ethical standards, complying with all legal requirements and sharing Levi Strauss’s commitment to the environment and community involvement, Levi Strauss’s business partners must adhere to the following employment guidelines:

-Wages and benefits: business partners must comply with any applicable law and the prevailing manufacturing and finishing industry practices.

-Working hours: partners must respect local legal limits on working hours and preference will be given to those who operate less than a 60-hour working week. Levi Strauss will not use partners that regularly require workers to work in excess of 60 hours. Employees should also have at least one day off per week.

-Child labor: use of child labor is not permissible in any of the facilities of the business partner. Workers must not be below 15 years of age or below the compulsory school age.

-Disciplinary practices: Levi Strauss will not use business partners who use corporal punishment or other forms of physical or mental coercion.

-Prison/forced labor: no prison or forced labor is to be used by business partners nor will Levi Strauss use or buy materials from companies using prison or forced labor.

-Freedom of association: the rights of workers to join unions and to bargain collectively must be respected.

-Discrimination: while respecting cultural differences, Levi Strauss believes workers should be employed on the basis of their ability to do their job

-Health and safety: Levi Strauss undertakes to use business partners who provide a safe and healthy working environment and, where appropriate residential facilities

2.Country assessment guidelines: these are used to address broad issues beyond the control of individual business and are intended to help Levi Strauss assess the degree to which its global reputation and success may be exposed to unreasonable risk. It was an adverse country assessment that caused Levi Strauss to cease its engagement in China in the early 1990s, largely on human rights grounds – a decision that has subsequently been reversed. In particular, the company assesses whether:

-the brand image will be adversely affected by the perception or image of a country among customers;

-the health and safety of employees and their families will be exposed to unreasonable risk;

-the human rights environment prevents the company from conducting business activities in a manner consistent with the global guidelines and other company policies;

-the legal system prevents the company from adequately protecting trademarks, investments or other commercial interests;

-the political, economic and social environment protects the company’s commercial interests and brand corporate image.

Levi Strauss is the example of the company that successfully combines doing business and following ethical practices. As we see, the company code of ethics demonstrates that Levi Strauss complies with the most labor norms and environmental standards; at the same time such actions of the company do not have any negative impact upon its business. On the contrary, since Levi Strauss has positive public image the customers should be more attracted to its products.

Some of the other important ethical issues that the company should consider is bribery and corruption. Bribery/corruption is not as clear-cut an issue as might first appear; indeed it can be rather a grey area. In some cultures, it is regarded as perfectly normal to give an official or host a gift (Asgary and Mitschow, 2002, p. 245). In others, only minimal value token gifts or no gifts at all are allowed. A problem arises when it is the norm for a contract to be signed only after the payment of a ‘commission’ to a key official or officials (Asgary and Mitschow, 2002, p. 240). Such circumstances place international companies in a difficult position: without payment of these commissions, the contract will not materialize and, if they do not make the payment, many other companies will (although that is not an ethical justification for going ahead with the commission). The position of the US is unequivocal about this: it regards all such payments as bribes and, as such, they are both unethical and illegal. The Foreign Corrupt Practices Law forbids US companies from making improper payments to foreign governments, politicians or political parties to obtain or retain business. Therefore, the only choice that American companies have regarding bribery is not to make any payments regarded as bribes; otherwise, it can be considered that a company violates the law.

The last ethical challenge that international companies face is related to environmental protection. Firms can encounter damaging publicity as a result of the environmental outcome of their activities as pollution attracts more and more media attention (Barlett and Ghoshal, 1998, p. 98). For many, environmental protection and corporate responsibility in this field has a clear ethical dimension. This debate is couched in terms of the ‘global commons’ in which all human beings have both a stake and a responsibility to ensure the well-being of the environment for future generations (Donaldson, 1989, p. 211).

In order to reconcile doing business and meeting environmental ethical standards an international company should comply with the following underlying principles in environmental policy.

The first norm refers to the “polluter pays principle.” It stipulates that polluters should pay the full cost of the environmental damage they cause (DeGeorge, 1993, p. 100). Environmental costs are often referred to as ‘externalities’ (for example, damage to health, rivers, the air, etc. arising from economic activity) that are not incorporated into the costs of a product but are borne by society as a whole (DeGeorge, 1993, p. 100). By making the polluter pay the full cost of its activities, including externalities, this principle provides an incentive to make products less polluting and/or to reduce the consumption of polluting goods. This internalization of external costs can be met through the use of market-based, policy instruments.

The other principle refers to prevention. If the company decides to follow the prevention principle it changes to products and processes to prevent environmental damage occurring rather than relying on remedial action to repair damage after it has taken place (Davies, 1997, p. 108). This implies the development of ‘clean technologies’; minimal use of natural resources; minimal releases into the atmosphere, water and soil; and maximization of the recyclability and lifespan of products.

In conclusion, international business adds an extra dimension to ethical issues within the firm. All organizations have their own culture based on common language and terminology, behavioral norms, dominant values, informality/formality, etc. This inevitably becomes more complex when an organization has a presence in more than one country. Some companies believe a strong corporate culture is a means of overcoming diverse national cultures whereas others evolve different cultures in different organizations and incorporate cultural diversity in their management strategy. Many organizations like Coca-Cola and McDonald’s do use core brands but still adapt their products for local markets and follow ethical standards, either out of necessity or to maximize returns. Ethics and corporate social responsibility are closely related. Debates about corporate social responsibility have been dominated by labor and environmental issues but a growing number of corporate governance scandals involving multinationals is increasing pressure for stricter regulation. International companies can reconcile doing business internationally and remaining ethical if they comply with labor and environmental norms enacted at the international level and establish and follow the code of ethics. In the long run, corporate commitment to sound ethical principles and socially responsible behavior is good for business.

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