Culture And Business Ethics

Although many ethical principles are universal, some are culturally bound. When this is the case, international businesses may be confronted with difficult ethical dilemmas.

Tina S
Tina S
Dec 4, 2009
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Culture and Business ethics

Many ethical principles are universally held across culture. For example, basic moral principles such as don’t kill or don’t steal apply everywhere, despite differences in local culture. Similarly, in all cultures it is regarded as unethical to unilaterally and without reason break a business agreement.

As Adam Smith pointed out more than 200 years ago, if people cannot trust each other to honor agreements, business activity will not take place, and economic growth will not occur. A certain level of faith that agreements will be honored – that parties to a transaction will do the ethical thing – is required to encourage economic activity no matter what the culture.

Briefly, ethics concerns itself with establishing norms, evaluating when a moral act is right or wrong as well as helping one to make moral decisions when confronted with a moral dilemma. 

Culture and ethics are interrelated and intertwined in such a way that it makes it difficult to know which factor guiding / motivating the behaviour is arising from a given situation. Is it the cultural vision of his/her ethics or is it the ethical vision of his/her culture that guides someone to do or not do certain things.

Although many ethical principles are universal, some are culturally bound. When this is the case, international businesses may be confronted with difficult ethical dilemmas. For example, guanxi[1] networks are often supported by the idea of reciprocal gift giving. But if a western company gives “gift” to a government official, as an attempt to build a relationship with that individual that may be useful in the future, that company may subsequently be accused of bribery and supporting corruption.
What then the ethical thing to do?

One response to such a dilemma is to argue that because customs vary from country to country, businesses should adopt the customs of the country in which it is currently doing business. 

This is the relativist or the “when in Rome” approach to business ethics. It is also a dangerously flawed approach. It would suggest, for example, that if slavery is practiced in a country, it is OK to practice slavery when doing business in that nation!
Obviously, this is not the case. Similarly, as several Western businesses have discovered, just because local sweatshops in parts of Asia employ child labor and pay them below subsistence wages, it doesn’t follow that one should adopt the same practice. Ethical values are not like coat that one puts on in certain seasons and certain places and takes off elsewhere. You cannot leave your ethics behind as you venture around the globe.

Organization such as the United Nations have pushed hard to get countries to ratify agreements that have clear ethical implications. An important example is the Universal Declaration of Human rights, which has been ratified by almost every country and lays down basic principles that should always be adhered to irrespective of the culture in which one is doing business. For example article 23 of this declaration states:

1. Everyone has the rights to work, to free choice of employment, to just and favorable conditions of work, and to protection against unemployment,
2. Everyone without any discrimination, has the tight to equal pay for equal work,
3. Everyone who works has the right to just and favorable remuneration ensuring for himself and his family an existence worthy of human dignity, and supplemented, if necessary, by other means of social protection.
4. Everyone has the right to form and join trade unions for the protection of his interests.

Bribery is dangerous; even it is sanctioned because the practice can corrupt both the bride taker and the bride giver. There is a dividing line between corruption and legitimate gift giving to support business transactions. It is a line that a manager with a strong moral compass should be able to recognize.
Reflecting on such dilemmas, the ethicist Thomas Donald has argued  that when thinking trough ethical problems in international business, firms should be guided by three principles.

1. Respect for core human values (human rights), which determine the absolute moral threshold for all local tradition.
2. Respect for local tradition.
3. The belief that context matters when deciding what are right and what is wrong.

Donaldson’s point that respect of core human values must be the starting point for all ethical decisions. Once these are assured, businesses must also respect local cultural differences, which he defines as traditions and context. Thus, Donaldson argues that “gift giving” is not unethical; even though some Western business might feel that it is wrong. Gift giving does not violate core human values and is important in the context of some cultures such as China and Japan. By the same taken, Donaldson would condemn as unethical decisions that clearly violate core human values. Employing child labor at less than subsistence wages would fall into that category.

International Business Ethics:

While business ethics emerged as a field in the 1970s, international business ethics did not emerge until the late 1990s, looking back on the international developments of that decade. Theoretical issues such as cultural relativity of ethical values receive more emphasis in this field. Other, older issues can be grouped here as well. Issues and subfields 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 and [Corruption rankings].
•  Comparison of business ethical traditions from various religious perspectives.
• Ethical issues arising out of international business transactions; e.g. bioprospecting and biopiracy in the pharmaceutical industry; the fair trade movement; transfer pricing.
•  Issues such as globalization and cultural imperialism.
•  Varying global standards - e.g. the use of child labor.
•  The way in which multinationals take advantage of international differences, such as outsourcing production (e.g. clothes) and services (e.g. call centres) to low-wage countries.
•  The permissibility of international commerce with pariah states.

In 2009, the International Trade Commission has been researching anti-dumping laws. Dumping is often seen as an ethical issue, as larger companies are taking advantage of other less economically advanced companies.

1. Guanxi describes the basic dynamic in personalized networks of influence, and is a central idea in Chinese society.


Author's note: Ref: International Business; competing in the global marketplace by Charles W.L. Hill
Keywords: Culture,Business Ethics,what is cultural ethics,international business,guanxi,trade commission,dilemma with ethics,Thomas Donald,relativist,Universal Declaration of Human rights,organizational ethics.

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