International Business Issues - Ethic as Subject to Cultural Differences

International Business Issues
Ethic as subject to cultural differences

Ethics can be a very vast subject on which some could debate and discuss without ending. There are many kinds of ethics with different definitions. For example there are medical ethics, normative ethics, Meta ethics, philosophy ethics, applied ethics, and more. The general definition of “Ethic” is “The rules or standards governing the conduct of a person or the members of a profession. It is the study of what is morally right or wrong.” We can also talk about ethics as a social, religious civil code of behavior considered correct, believed and respected by a particular, professional or individual group. It is very difficult to define ethics in one single definition because the degree of ethics and the way it will be described will vary between people.

Here we will only work on business ethics. Business ethics are “the collective values of a business that can be used to evaluate whether collective behavior is acceptable or inappropriate.” And more precisely on international business ethics. Because it is only on the international point of view that we might be able to see if there is a connection between ethic and culture.

Culture today can be defined as a group of distinctive features (material, spiritual, intellectual and affective) that characterize a population or a society (company). These features aren't the same for everyone. Each population or societies have more or less different features. This is why we can talk about cultural differences.

So is there a real relationship between ethics and cultural differences?

Cultural differences have a great role in today's world of international business. Because every company has its own set of ethics, but depending on where a company is located in the world or in which atmosphere it grew in, the ethics can be very different. An Indian company will not have the same ethics as an American company, for example.

In India, business is done very differently from Europe and America. Meetings in India always start by a friendly talk, to first of all create a nice atmosphere, but even more importantly because friendship is also highly valued for them and is important for future business. During this friendly talk the Indians want to hear about their interlocutor’s family. Because it is necessary for them to know that the person they are negotiating with has a solid family situation. To refuse a gift from them is considered as an offense. There are specific dress codes for women in business. It is also very rude to shake hands with a woman in a firm or business meeting.

So it is essential for any company wanting to enter in to business with an Indian company, to beforehand do the necessary research, to be aware of all these cultural differences, otherwise business and negotiations could end up being catastrophic.

More over companies should be aware, that since the sudden globalization enhancement of the 21st century, societies are confronted with an enlargement of the number of differences (cultural differences), and ethics, due to the very fast growing Asian countries, on the business plan and the world’s economic plan.

This increase in globalization is followed by the increase of corruption concerns. The increase in corruption is seen by the number of bribery related enforcement actions initiated by the Securities and Exchange Commission (SEC) and Department of Justice (DOJ). In the last seven years this number has far exceeded the total count of such enforcement actions initiated in the first 23 years after the Foreign Corrupt Practices Act (FCPA). (Data taken from the International business and economics research journal.)

This is a worldwide problem, because it reaches across international frontiers and cultures. And what made the corruption problem bigger, was the enhancement of the Asian counties in the International business world. In the 2010 international corruption transparency perception scale, India has was given a score of 3.3 and china a score of 3.5 out on a scale of 10. These results are very low compared to the other leading countries in the business world such as America or Europe. This shows the extensive perception of corruption.

In the 2003, the United States realized how serious this ethic problem was and decided to do something about it. And this followed by the creation of the United Nations convention against corruption, signed by 111 countries. The numbers of adherents have been increased since then. These countries having signed, agree to carry out measures to fight and prevent corruption.

One of these measurements of fighting corruption in business today would be the Global Business Standards codex. This codex is a code of conduct, which helps corporate life to be easier. Each company should, or has to adopt this codex, but is free to adopt it in its own way. This means that a company can modify its principals to its specific business or business conditions.

So this codex delivers a starting point for the company in its ethical structure and paralleled with an up and coming global assent on corporate behavior and standards. The Global Business Standards codex is formed of 8 principles witch are property, transparency, dignity, citizenship, responsiveness, fiduciary, fairness and reliability. The fiduciary principle is assiduousness and loyalty. Managers and employees have legal duties such as working in the best interest of their stakeholders and also generate positive benefits. The property principle is related to protection and theft. Employees have to respect the property in their environment and therefore their property owners. The reliability principle is contracts premises and commitments. The employees of a society should honour their work.

The transparency principle can be truthfulness, deception, disclosure, condor, objectivity. Every employee should be honest in his business behaviour. The dignity principle is health and safety, respect for the individual, privacy and confidentiality, use of force, association and expression, learning and development, employment security. An employee has to respect everyone dignity. The fairness principle is about fair dealing, fair treatment, fair competition, and fair process. All the employees of a firm should treat fairly any stakeholder showing interest in the same firm. The citizenship principle is law and regulation, public goods, cooperation with authorities, political non-involvement, and civic contribution. Every employee should always act as a responsible citizen. The responsiveness principle is on addressing concerns and public involvement. Employees have the obligation to answer a stakeholder’s demand concerning internal and external information.

There is also the U..S. Foreign Corrupt Practices Act witch fights against corruption. It prohibits the bribery of foreign government officials by U.S persons and prescribes accounting and record keeping practices. This act states penalties and punishments such as 2 million $ fine, or up to 5 years or imprisonment.

Ethic can be a concept difficult to define, because of different perceptions that it can have from different cultures. But in the end, each culture receives the same effect from ethic, no matter what differences we can have. As long as a society can obey its own ethical code, and can rely on the truthfulness of another firm. Business should work well. If not respected, in the case of corruption, punishment will take place. And maybe one day, business ethics will no longer have to encounter the problem of cultural differences, seeing that all corporate companies will have and share the same business culture.

References and citations:

Spencer Hamilton (Lecture 1)

Harvard Business Review Article: Up to Code: Does Your Company's Conduct Meet World-Class Standards? By Lynn Sharp Paine, Rohit Deshpande, Joshua D. Margolis, Kim Eric Bettcher