Global businesses are faced with ethical decisions they have to make every day. They have to decide the ethical principles the company will operate by in the area of human resources, accounting, marketing and advertising, manufacturing and production. There are steps that the management can take to ensure that the company operates well. A code of ethics should be introduced and the staff to be trained to understand the code and how they shall apply it in the work place. Managers should aim to affect the ethical climate.
Ethical challenges in Human Resources
In the area of human resources, the human resource manager has to look at concerns such as discrimination on the basis of age, colour, racial or ethnic background and gender. To provide leadership that will ensure ethics are observed in the workplace, the management should introduce a code of ethics which will be a tool used to create an ethical culture and climate in the organization (Ferrell, Fraedrich & Ferrell, 2008). Organizations should have ethical officers who will oversee the implementation of the ethics and communicate through reports to management on the progress. The management can also introduce cultural diversity practices which assure the people who are a minority in the organization that they have an opportunity to succeed in their careers in the organization.
There should be policies on sexual harassment and the consequences of engaging in such vices. People need to feel safe in working for their organization as it raises their productivity. There are the ethical issues that arise in the area of safety and providing comfortable working conditions. It is important for the organization to operate ethically in order to avoid law suits.
Law suits are expensive and consume a lot of money, human labour and time (Mahdavi, 2001). There should be equipment that is suitable for the work environment. The furniture should be in good condition. If there are too many accidents in the workplace, the organization may have to pay more premiums to the insurance companies.
In a workplace with high incidences of discrimination and sexual harassment, there will be high turn-over of the employees. Every human being deserves to be treated with dignity and respect (Hill, 1997). The retention will be low raising the costs and time spent in recruitment, training and orientation. Succession-planning and mentoring will also be difficult.
Ethical challenges in Marketing and Advertising
Another department that faces ethical challenges is the marketing department. With an agenda of making high sales, the marketers have to decide whether they will engage in false advertising or not. In order to attract customers, they are those who will lie about the nutritional content when it comes to food or the performance of the vehicle when it comes to a piece of equipment. In countries such as the US and the UK, false advertising is an offence and the managers may go to jail. In other countries especially in the developing world, there may be no laws that ensure companies do not engage in false advertising. The managers who are facing a global business environment have to make a decision on whether they will extend their ethical behaviours to foreign countries. In the global environment, the code of ethics plays an important role in ensuring the managers behave in a professional and appropriate manner even in other countries.
There is also the use of harmful substances in the food industry. The US government may have picked up a substance in the food and ordered the company to manufacture the product without the harmful substance. However, other countries may not have stringent laws providing the global company with an opportunity to sell the banned products and yet make a significant profit. The managers should refrain from doing so.
The media has played an important role in ensuring that global organizations adhere to business ethics. Once they find out any actions of the company deemed to be unethical, they publicize the issue and the company will lose the goodwill of the people and their loyalty. In the long-term actions that seem to secure sales for the company end up causing the company to lose customers and eventually be banned or shut down by the government.
Ethical Challenges in Research and Development
It is a grey area when it comes to managers deciding how they should deal with the competitors. This is an area where there should be policies that will guide the business researchers and analysts. They are actions that the managers may take that are underhanded and unethical. When it comes to ethics, they may not be compatible with the law. The law may be silent on certain issues, however it is widely accepted in the world that such behaviour is unacceptable. Unethical practices include questioning and milking the potential recruits from competing companies for information. Fake interviews could be conducted yet the only agenda is to gather information (Saee, 2009).
There are those plant managers who will disguise themselves and go for a plant tour or study aerial photographs of the competitor’s plant in order to get information on their strategic operational plans. There are managers who will get in touch with suppliers and design consultants who have worked with the rival company and debrief them or grill them relentlessly for information. There are business environments such as Asia where there are high incidences of copyright and patent infringement. At times, especially in global operations, the managers will find themselves in countries where there is no equal playing field offered for all the companies. They may use this as a justification on why they should play dirty. However, these managers should act in an ethical manner in all the countries where they are operating.
Ethical Challenges in Research and Development
In the recent years, the environment has become quite a weighty topic and managers are encouraged to ensure that they act in an ethical manner. With globalization, one of the disadvantages has been the danger posed by the release of harmful substances into the atmosphere and water bodies. The scientists have communicated that such behaviour is not sustainable in the short-term and in the long-run. There are diseases such as cancer spread by such irresponsible behaviour. There is an ecological imbalance as plant and marine life fight for their survival against these harmful, foreign substances in the sea. Companies should come up with policies that will guide them in environmental protection. There are companies which have taken the issue seriously and it is not just a matter of compliance for them but it is an area where they go far and beyond what is required to ensure they are protecting the environment.
There is a lot of pressure for companies to engage in corporate social responsibility. The media works relentlessly to expose those who do not. Companies should work to avoid lawsuits and bad publicity. There is a challenge when it comes to sustaining ethical behaviour when it comes to the global arena. In developed countries, there are stringent laws that curb environmental pollution however in the developing countries there is laxity and complacency which multinationals can take advantage of. An ethical culture will lead the managers to act in the right way.
Ethical Challenges in Accounting
In the recent years, there have been scandals in companies where managers and the board of directors took advantage of the authority they have been given by the shareholders. The accountants and auditors have a responsibility to the shareholders to ensure that the company assets are safeguarded. The financial information should be fairly presented in the financial statements for the stakeholders to know and understand the true position of the company. There is also a duty to the potential investors who are scouting the stock exchange market looking for a company which they can invest their wealth in order to get a good return.
It is wrong to mislead the potential investors to invest in a company based on fictitious information then they end up losing their hard-earned income. Accounting officers and managers engage in unethical behaviour by participating in creative accounting. This is also known as earnings management or income smoothing (Amat & Gowthorpe, 2004). The main objective is usually to present a fairer or rosy picture of the financial status of the company yet it is not true. There are certain things that motivate the managers to engage in creative accounting.
They may want to avoid certain taxes leading them to understate the income or profit. At times the managers and the board want the shareholders to have confidence in them that they have been able to stabilize the income of the business over a certain period of time. They also want to meet the psychological expectations from the managers or the public that the income will increase in the near future. There are times when the management maximises on reporting losses in order to make the future years look even better. This is known as big bath accounting.
Where the company expects to engage in significant market transactions, there will also be a higher risk of creative accounting. The higher incomes help the company to maintain a good share price especially where the debt levels are understated. The company is therefore able to raise money through new shares issue and even resist hostile takeovers. The executives are also judged based on the performance of the company. The higher the incomes and the stability of income reported, the higher their end of year bonuses and commissions. They are worried for their jobs and want to retain their positions.
There are justifications presented by experts on why this type of behaviour should be condoned. They want to decrease the volatility of earnings and control the high expectations of the public and analysts concerning the company’s performance. However, there are serious dangers in creative accounting. First of all, it is unethical as the accountants and managers will not be able to control themselves and do these actions based on the right reasons.
There is selfishness involved as managers want their companies to be recognised in the industry. They want higher bonuses and commissions. They want to retain their jobs.
They are those who will participate in window dressing yet they are stealing from the company. It is therefore ethical for the management to have internal controls in place to ensure the correct information is presented and the company’s assets are safeguarded.
There should be corporate governance where there is recognition of the rights of the shareholders and managers accept their role as stewards or agents. The ethical behaviour should be outlined and the control functions such as internal audit, accounts and risk departments conduct their roles well. The managers and board should be committed to the success of corporate governance structures to ensure rights of shareholders are protected.
Ethical Challenges in Registering a Business
There are ethical issues that arise when setting up a business in global arenas at the registration process. There is the tendency to bribe government officials for certain favours especially in developing countries. In certain countries such as Belgium and Greece companies are allowed to deduct bribes as business expenses. They are deductible expenses from the taxable income.
European laws have put in place laws and measures against corruption however there are countries where bribery is allowed. The ethical managers however should exercise the same standards in the developed countries and the developing countries. These laws that allow bribes as expenses legitimize corruption. However, leaders in this country say that a lot of corruption is brought by foreigners through multinational companies.
The European laws do not extend beyond its borders however American laws do and those who have been found guilty have been convicted and even sent to prison. It has brought certain challenges being ethical since multinationals from other countries especially Europe have been able to edge out U.S multinationals in various target markets by the use of bribery.
In certain African countries, bribery has become so much of the norm that it tends to override the laws of the country. In the developing countries, the government officials earn low salaries therefore they supplement their incomes with bribes. In Japan, bribery is widely accepted. In Canada, Exxon and General Motors made political contributions that were accepted in that country however in the United States they were considered to be illegal. The entrepreneur who desires to enter new target markets has to decide that bribery is unacceptable.
Conclusion
A code of ethics outlines the acceptable behaviour to the staff. It creates an ethical culture which is even stronger in deterring unethical behaviour. Culture affects the deeper beliefs and values of the employees. Ethical standards should be respected and adhered to. The ethical climate shows the perception that the employees have of the code of ethics introduced by the management into the company. These values should be applied both in the host and foreign countries even though the ethical challenges at the global arena are more complex.
In competing with others, a company should work in enhancing the quality of their products rather than stealing information, bribing or engaging in false advertising. Employees are an important asset of any company they should therefore be protected and their rights secured. Organizations that promote culture diversity have employees who feel appreciated and they will work harder with all their passion.
References
Amat, O., & Gowthorpe, C. (2004). Creative Accounting: Nature, Incidence and Ethical
Issues. Working Paper Series, Universitat Pompeu Fabra, 749. Retrieved from
http://ssrn.com/abstract=563364
Ferrell, O., Fraedrich, J., & Ferrell, L. (2008). Business Ethics: Ethical Decision Making and
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Hill, A. (1997). Just Business: Christian Ethics for the Marketplace. Downers Grove,
IL: Intervarsity Press.
Mahdavi, I. (2001). International business ethics: strategies and responsibilities.
Journal of Academic and Business Ethics. Retrieved from http://www.aabri.com/manuscripts/09279.pdf
Saee, J. (2009). Ethical Challenges Confronting Entrepreneurs within
Contemporary Global Economy: In Search of a New World Ethics. Journal of Management Systems, 21(1), 49-59.
