Globalization has come up with major trends amongst multinational corporations and other ordinary entities. This is because the idea of doing business across different boundaries lends itself to unique and distinct issues and matters. Globalization comes with a high degree of uncertainty because it involves dealing with many issues and matters across boundaries. In the past, most nations around the world were focused on dealing with matters within a given national framework or country. However, multinational entities deal with things that spans across different nations and communities. This comes with major problems and challenges. Furthermore, ethics are subjective. They deal with individual managers and directors’ views and conceptions. This leads to major problems and risks.
The purpose of this paper is to critically analyze and review the central ethical challenges that businesses in today’s globalized economy face. This will include a review of major pointers in ethics from a moral reasoning perspective as well as the illustration of major pointers and ideas that relate to contemporary matters and issues. The approach to be used by the research is a literature review which will include elements of analyzing and reviewing journals and other secondary sources like books to gather information on the subject.
Ethics in Business
Ethics are an aspect of moral philosophy and this includes normative and rules-based approaches to ensure that a business does things in a manner that does not affect any stakeholder in a negative sense. Ethics are values and actions that are classified as good and moral and are used as the yardstick for the activities of companies and peoples. However, the issue with ethics is that they are accepted within a socio-cultural context and this varies across geographical areas and communities. This is because ethics are a set of generally accepted moral principles that makes a given company’s actions right and another company’s actions wrong. Hence, they are meant to provide the basis for measuring conduct. And due to the fact that they are not geographical, they are challenged in the global economy, because what might be acceptable in one country or community might not be acceptable in another. For example, in a country where environmentalism is important or vital like Australia, it will be wrong to seek a purely profit motive. On the other hand, in a country like India or China which believes that they have to work harder to bridge an economic gap, environmentalism might be an issue that must be ignored in favor of higher productivity.
Ethical decision making is a responsibility for the management of a company because the strategic managers (directors and top-level managers) are ultimately accountable for the actions of a company. This is because in most jurisdictions, a company has a completely separate existence from its owners. However, the company’s owners do what they have to do in order to preserve the best interest of all stakeholders of the company. This obligation is delegated to the directors who have a fiduciary duty to the company and hence, transfer it to the managers of the company.
One of the elements of business ethics is that the definition of “what is right” and “what is wrong” is not universal. There are several approaches directors can use to define ethics that they will apply in a given set of circumstances and this includes:
Utilitarianism: Consequence based ethics
Deontology: Duty based ethics that must be inherent in the intentions of a decision maker
Virtue ethics: Doing what is right and what will make you respectable
Background of Ethics in a Global Market
Jones et al (2005) present the concept of “global capitalism” as a means of promoting an intention-based process of establishing business activities in far-away lands as a means of gaining economic benefits. Obviously, most companies in western economies establish branches and units in distant lands for the profit motive. Furthermore, other countries like China and Russia might establish multinationals to pursue their own interest and desire of growing and taking advantage of their national expansionist goals.
However, in such a drive, they will seek to provide a kind of service to the citizens of the country. This will include various processes of providing solutions to the locals. But in this process, there is a minimum of the home ethics and the host country’s ethics. If a company pursues the host country’s ethics, they will be pursuing their fundamental obligation of being a good corporate citizens. On the other hand, following the home country ethics prevents a multinational from being labelled as a hypocritical company. Thus, some countries like Australia, the UK and the United States have regulations that allow people affected by their multinationals to sue for class action suits in the home countries of these companies when the companies misconduct themselves or undertake illegal activities in foreign lands. Popular companies like Dutch Shell and others have been affected by these arrangements in the past and this has caused the companies to face the consequences for their actions overseas.
In spite of this, it must be noted and pointed out that there is a lot of difference and ambiguity in the system of accountability for ethics. This is because the basic regulation and control of the ethics of a given company has to be done by the host country’s regulations. This is because the system is such that it must be enforced by the local government that is affected. This is because that is the only way and process through which they can be controlled and limit.
Some writers argue that the new economy that results from globalization is based on the fact that there is an artificial or rhetorical fabrication that makes up this global system. This is because the new global economy is driven by one thing – financial gains. And with the many loopholes and grey areas that come with the new global economy, there are many ways these parties and stakeholders can overrule and avoid honoring ethical requirements. Due to this, the global markets are full of problematic pointers and matters which make it so difficult for any kind of regulation to be put in place and enforced. There are major enforcement challenges and problems that stand in the way of the proper implementation of ethics because there are many possible approaches to avoid doing what is right and required of a multinational firm.
Another aspect of ethics in the global economy lies in the fact that ethics are somewhat self-regulatory in the global economy because firms have the obligation to find out ways of regulating themselves and carrying out ethical actions and processes. There are many different procedures and systems that are used by a company and being inspired and directed by the profit motive, most firms and organizations are required to do things by creating their own processes of honoring and monitoring their actions and processes for the activities of the company.
Another angle of this discussion is based on the fact that there is a higher degree of uncertainty on the global market. Hence, there is a general trend towards sympathy for these international and global managers. This is because they have many more things to be careful about and sensitive to in the process of meeting their best interests and desires. Therefore, it might be unfair to hold them to an extremely high standard of operation and processes. This often leads to an onerous requirement for ethical compliance which might appear to be extremely demanding.
Ethical Challenges from Globalization
Ethical challenges are mainly based on the developmental gaps between nations in the global economy because in nations where the level of regulation and standards are higher, there is a relatively high level of ethical responsiveness. There are numerous complications and issues that come with the processes and procedures for the carrying out of different processes for regulation and activities.
Information Technology and Surveillance
The global economy is highly dependent on Information Technology and long-distance communication. People are able to gather a large array of information and this information is utilized to gather intelligence about markets and consumers in order to provide services for them. Thus for example, a company like Facebook can have a wide array of information about consumers in a remote country on the other side of the world. This gives them an advantage over local entities.
Holding a lot of information about a large number of information comes with a lot of obligations for the protection of this information. One obligation is about the need to ensure that the information is not misused. If the information is extreme and excessive, there is the risk that a multinational company will misuse it. This includes selling products to vulnerable people and forcing people to make purchases they do not need.
Secondly, there is the problem of selling out information acquired in the online system. This includes giving information to third party companies through algorithms and web analytics. These problems are somewhat negative and could lead to major problems or cause major entities to do things that are not right and do not meet the expectations and standards. This is something that is problematic and must be regulated. However, which country’s regulations is appropriate or not is based on the facts and circumstances at hand.
Finally, there is the risk of hacking and presentation of information to third parties who might be dangerous and negative. This includes the fact that information could get into the hands of terrorists and criminals who might abuse it. There are many problems and risks that could come up with such situations and matters. There is the example of Ashley Madison which had its information for worldwide clients compromised. There were threats of publishing them and this was something that no one could have handled because the digital economy lends itself to ambiguity and faceless hacking which cannot be easily controlled or dealt with.
Morality is not set in stone, it is not extremely objective and standardized because it has elements that varies from culture to culture. Therefore, information technology in this area is not defined by strict standards, but by basic views of what is right and wrong determined by managers. This leads to a situation that has been described by some authorities as managerial subjectivity because managers will have to choose what is right in various situations and contexts. This means that there is no objective standard nor objective system for dealing with what is right and what is wrong.
Obviously, the risk of individual morality gives room for subjectivity which negates an objective reality which is required for the proper and effective enforcement of ethics in information technology and surveillance. An objective legal system is necessary for the creation of a procedure through which a company or entity can be regulated in a fair and clearly defined process in IT and privacy. However, since the global business environment is diverse and lends itself to many different possibilities, there is a major problem with the ability to define what is right as opposed to what is wrong.
Company Customer Relations
Customer relations is an important part of the conduct of business. This is because it is to be done on the basis of the generally accepted moral code and system. Since companies seek to minimize costs and maximize revenue, every company seeks to cut down on its spending. If a company operates in an economy where the cost of customer relations can be reduced, they will do so in order to gain benefits and maximize their profits. This often leads to the poor treatment of consumers and prevent them from getting their basic rights fulfilled and honored.
Information technology breeches allow for major problems to occur. Customer information could be misused and abused and customers’ privacy could be compromised because there is no set rules and regulations for companies’ IT processes and systems. This allows for a high degree of abuse and problems in the sector.
Employee Working Conditions
There is a minimum wage that every country has to protect its nations. Some countries have minimum wages that are many times lower than others. In the global economy, this unevenness and the lack of an objective standard for treatment leads to an open door for cheating and disrespect of the rights of some members of the society. This leads to major human rights challenges like the poor housing and poor factory conditions in Asia which kills many workers who work for multi-million dollar entities that make a lot of profits at their expense.
Employee activities and processes are influenced by Information Technology malpractices and problems. This is because the way communities run their IT systems and processes vary across nations. Hence, the wrongful running of information and the poor practices in a company could lead to major breaches that could lead to serious problems and circumstances.
This is a problem with the export of foreign cultures into other cultures where the local cultures are rendered inferior. Many scholars view this aspect of cultural capitalism as a form of neocolonialism whereby a group of foreign entities move into a country and creates an upper class over the locals. This leads to many problems that causes the locals to get poor and remain poorer. In other instances, some countries recreate the problem of technological feudalism which is a problem with the fact that countries with better technologies enslave those countries that have little in terms of technology and development.
The Information technology process and system of nations lead to major problems which accelerates this concept of cultural feudalism. This is because information technology leads to major problems and allows people to work across different cultures and different national frameworks. This means that a country and its people will have no other option but to fall for the intrusion of a foreign culture and a foreign attitude which might be disruptive and negative to the dominant culture. Hence, there is the need for some kind of objective standards and regulations to deal with this risk.
The nature of ethics is such that it defines what is right and what is wrong. Ethics provide the basis for measuring the appropriateness of the conduct of different people in society. The problem with ethics is that it is subjective and is based on what the directors of a company choose and the decisions of managers who face ethical dilemmas.
In the global world of business, ethical challenges are compounded by the fact that there are competing cultures and there is an indefinite system of controlling a given ethical framework. Therefore, it is problematic. This leads to problems with information technology and storage of information, challenges in defining morality, dealing with human rights in customer relations and employee work condition as well as problems with cultural capitalism and technological feudalism.
Boltanski, L. & Chiapello, E., 2005. The new spirit of capitalism.. London: Verso.
Clegg, S., Kornberger, M. & Rhodes, C., 2007. Business ethics as practice.. British Journal of Management , 18(2), pp. 107-122.
Foucault, M., 1997. The politics of truth.. New York: Semiotext(e).
Gilleo, M. P., 2001. Ethical Issues in the Global Economy. Bulletin of Science Technology Society, 21(4), pp. 272-280.
Ibarra-Colado, E., Clegg, S. R., Rhodes, C. & Korberger, M., 2006. The Ethics of Managerial Subjectivity. Journal of Business Ethics, Volume 64, pp. 45-55.
Jones, C., Parker, M. & ten Bos, R., 2005. For business ethics. A critical text.. London: Routledge.
Messner, M., 2009. Limits of Accountability. Accounting, Organizations and Society, Volume 34, pp. 919-939.
Thrift, N., 2001. 'It's the romance, not the finance, that makes the business worth pursuing': disclosing a new market culture. Economy and Society, 30(4), pp. 412-432.