International Business Ethics
Introduction
Every time we buy a product in the United States and Canada, we should take note of where it is produced. We will notice that most of our TVs and Computers are made in Asia. It is difficult to find a children’s toy that is not made in China or another Asian country. In fact, many, if not most, of our products are made in whole or in part in a developing country.
The largest multinational companies, such as BP, Toyota, and General Electric have huge incomes, in fact higher than or close to the total income of whole countries, especially developing countries such as South Africa. Many large companies do business in foreign countries: selling, buying and producing. Multinational business activity -- due partly to the size of the companies involved and the poverty in many foreign countries -- leads a variety of moral issues. We will cover some of those issues in this unit.
Not only do size and income disparity among nations cause problems, but added to these issues is the fact that business is done very differently in many nations, especially in developing countries such as Ethiopia, Pakistan and Sri Lanka. For example, bribes may be a common way of doing business. Special restrictions may be in place about those with whom one may do business. Child labor may be freely employed. Environmental restrictions may be nearly absentand worker protection nearly non-existent.
It is easy to claim that U.S. corporations should not take advantage of conditions, such as low labor costs and weak environmental laws, in underdeveloped countries. Such claims should take into consideration the tremendous poverty in these countries. If U.S. companies always played by the rules in place in the United States when in developing countries, for example, by U.S. minimum wage rules, they would not be as willing to produce in developing countries. Not doing business in a developing country might, or might not, be good for the U.S., but it is likely not to be good for the citizens of a developing country. Keep in mind that poverty leads to a malnourishment, starvation, stunted life-expectancy, health problems and despair. It is estimated that up to 15 million children die of starvation each year. That is well more that the population of a state such as Ohio. If the figure is accurate, it means that each day on average over 40,000 children starve to death. Many people around the world, perhaps more than a billion, live on $1.00 or less a day. In short, absolute poverty is a way of life in many developing countries. (Check out these claims as well as many other statistics:
Given relative inequalities and poverty, is it appropriate to transpose rights as viewed in developed countries to underdeveloped countries? Is environmental protection as important in the circumstances of starvation and poverty as in the U.S. and Canada? Should corporations follow the practices of other countries, or should they stick to rules and regulations as practice in the home country? We turn to these and other questions involving multinational corporations.
Income of 25 Corps.
“When In Rome…”
The well known phrase, “When in Rome, do as the Romans” conveys the wisdom of abiding by local rules, regulations and behavior patterns when living in or visiting in foreign places. It is insulting and dangerous not to do so. Difficult as it is, Canadians and Americans should not drive on the right in England. We should even behave differently when crossing a street in London; failure to recognize the different driving convention may lead to being run over. Indeed, failure to follow the laws of another country may lead to a prison sentence.
Nothing is odd about the fact that there are different laws and behavior patterns in foreign countries. There are even differences in laws from state to state in the United States. People do act different in different parts of the country. Acting in as others do in a different places, including foreign countries, is often morally and socially acceptable.
Problems arise when acting according to the way things are done in another placegoes against one’s moral views. It would be odd to say that one has a moral objection to driving on the left, or an objection to a business break at noontime. (Try getting gasoline at noon in much of Italy or Spain.) These are conventions, and do not involve different moral values. Driving rules are partly arbitrary as are standard business hours.
We should not exaggerate the extent to which we are should do as the Romans. It may be that some practices in a foreign country are not thought of as binding on a foreigner in the same way it is considered binding on someone from the other country. Wearing a traditional outfit might not be considered proper or not required of a foreigner. A particular management style might be thought of as optional, not required, even though most companies in a foreign company act that way. It is good business practice to find out the status of various customary practices. Nevertheless, failure to follow some practices may lead to business trouble, especially if the actions are sanctioned by law. Failure to follow customary politeness requirements, such as addressing a person in a formal way, could lead to loss of business. Again, it is important to find out the status of various requirements.
Insofar as a practice in foreign country is merely conventional, meaning that it does not conflict with moral rules of the visitor, then following the convention is a matter of choice or prudence. If the convention is uncomfortable to follow, then it may not be worth doing. If it is worth following, there is no moral objection to doing it. That sounds easy enough, and sometimes is, but at other times conventions may hide attitudes that are morally unacceptable. For example, dress requirements for women may seem discriminatory. Should the home business require woman in a host country to dress by traditional standards? Is that an unacceptable form of sexism? Does it make it right to understand that it is custom in the host country?
We do have moral objections against harming others, lying, and stealing. We believe in religious tolerance, equal rights for women and men, and for minorities. We reject as unethical giving bribes to do business. We know that some of these standards are not as widely supported in other countries. Should we “Do as the Romans” when that means violating our moral values?
We can ask the question in a different way. Suppose in some foreign country people routinely take and insist on bribes to do business. Let us add that it is considered not only morally acceptable but perhaps even morally demanded, in the sense that not to do so would be insulting. Is it the case that it is morally acceptable to take and give bribes in that country but morally unacceptable to do so in the United States? This is the problem of ethical relativism.
To understand ethical relativism, we shouldfirstdistinguish a descriptive statement about moral commitments from a prescriptive moral judgment, or normative statement. Only the latter belongs to ethics. The first is the kind of statement made by the value-free scientific inquiry of anthropology, sociology, or history, rather than a value-laden, normative judgment made by a moralist or a moral philosopher. And, while the second is highly controversial, the first is a mere statement of plain fact over which there can he no real disagreement. But this crucial ambiguity is masked in ordinary English, where the statement, "Polygamy is morally right in Saudi Arabia," can mean either that the Saudis think that polygamy is morally right or that polygamy is morally right, at least within Saudi Arabia. Since only the second has any possible relevance as an ethical theory, we will consider only the second interpretation of the ethical relativist's statement to be ethical relativism proper. (You might want to read about ethical relativism in the moral theory section. Provide link.)
If we are ethical relativists in the sense that we consider the values in a particular society to be morally binding on people in those societies, then when in a host country we may be bound to follow those moral requirements, even when they conflict with home values. Another way to look at ethical relativism is to say that people are bound by their society’s values. We might say that every society properly has its own moral rules; but we add that the power of such moral requirements do not stop at one’s border. For example, those practicing a religion that does not allow the consumption of pork typically will not eat pork when visiting another country. Under this view of ethical relativism those doing business in another country are morally obligated to follow the moral requirements of the home country rather than the host country.
The other view of ethical relativism is that values are valid in the society in which they are practiced. They are binding on people in that society. This would mean that it is morally obligatory for a business person in a multinational country to follow the moral practices of the host country. This would make moral values similar to laws. People are typically bound by the laws of a host country.
***Moral absolutism claims that there are objectively valid moral values. Once known, these values bind everyone. Consider the value that it is wrong to torture, at least that it is typically wrong. In many societies, and in the historical past, torture is or was a frequently relied on practice. The moral absolutist would claim that such torture might violate a universal, objective moral law. If so, it should not be practiced, at least typically. The same might be said for taking bribes.
If moral absolutism is correct and a person believes that his or her own values properly state objectively correct moral obligations, then those obligations bind no matter where one is.
We should keep in mind that in advanced industrial countries such as the U.S. and Canada there is little agreement about moral values. We have seen that there is a basic split between consequentialists such as utilitarians and deontologists. Both might have different views about the moral values that are binding when doing business in a foreign country. The deontologist may claim to know the right thing to do, and would insist that it be done, even if bad for business and for people in the host country. The utilitarian would insist that the business person consider the good and harm done by acting in a certain way. Part of the backdrop to that calculation is the fact that people in the host country may support values that a utilitarian might reject in the U.S. That does not mean it would be objectionable to the utilitarian to do in a foreign country what he or she would reject in the home country.
Let’s take a trivial example. Suppose a woman is told, in the U.S., that she is to ware a veil when talking to people from a particular foreign religious group visiting in New York. A utility calculation should be done by a utilitarian. The visiting group may be offended, but they recognize that most people in the U.S. do not wear a veil. They are traveling and so probably expect to see many people without it. It is difficult to believe that they will experience great discomfort by seeing a woman without the veil. On the other hand, the woman asked to ware the veil might feel terribly offended. The calculation might yield the result that more unhappiness than happiness follows from forcing the woman to wear the view. Now imagine that the woman is representing an American firm in a foreign country where wearing the veil is expected. A new calculation is made determining that failure to wear the veil leads to more unhappiness than happiness; the utilitarian concludes that the woman has an obligation to wear the veil.
We expect that most business woman in such a foreign country would wear the veil, at least when most expected to do so. Virtually no one is morally opposed to doing so, although some may view it as a general affront to woman. We know that reporters, such as Barbara Walters, will wear a veil in some circumstances. This shows respect for the foreign culture and probably does not violate the reporter’s basic values. Many traditional practices are similar to wearing the veil, such as bowing. By and large it seems unobjectionable to follow such practices.
Problems arise when a cultural practice seems to fly in the face of widely held basic moral convictions.
Violations of Basic Moral Values
Bowie in “The Moral Obligations of MultinationalCorporations', (Problems of International Justice, ed. by S. Luper-Fay, Westview Press, New York, pp. 97-113, 1987) contends that most moral obligations of multinational company is no different from any other company. Companies have moral obligations to all of their shareholders. This is the same whether in the United States or Canada or in another country. For example, Bowie states that it is wrong to take advantage of disparities in income among workers in different places. If it is wrong to move production from Michigan to South Carolina, it is also wrong to move production from the United States to Mexico.
Problems enter when a multinational is doing business in a foreign country. Bowie claims that there are three basic alternatives about which norms to follow when doing business in a foreign country: (1) Follow the norms of the host country; Bowie considers this option to be a form of ethical relativism. (2) Follow the morality of the home country; Bowie considers this to be a form of ethnocentrism. Ethnocentrism is a view that places one’s own culture in a central position, thinking that other groups and viewpoints are less important. The term is usually used in a pejorative way. (3) Follow universal or objective norms. These norms supposedly cut across cultural boundaries and apply no matter where one is.
Bowierejects ethical relativism because it puts the world into a kind of moral chaos. Imagine that it would be appropriate for everyone to decide whether it is appropriate to follow basic moral rules. This means that people could steal, kill, insult, lie, fail to follow obligations of parenthood and the like. That is not the kind of society, Bowie would argue, that people desire. We need moral rules. But the fact that every individual within a given society cannot be permitted to make up and live by his or her own basic moral rules indicates that it is wrong for every individual society can have its own set of basic moral rules. At least today, acceptable international relationships depends on having a basic common morality, a sense that basic moral rules apply to everyone no matter what their country. Bowie points to such common rules: “There is a whole range of behavior, such as torture, murder of the innocent, and racism, that nearly all agree is wrong.”
So far Bowie’s argument supports the third position, in favor of universal or objective moral norms. He points to rules that seem to be basic. If we find out that some American company doing business in Sri Lanka, or any other developing country, is using torture to sell its products, virtually everyone in the national and international community would condemn the practice. There would be little argument against the idea that it is morally wrong to act in that way. We might add that even the ethical relativist would agree because such torture is virtually universally condemned.
So far Bowie seems on, at least with his contention that there are agreed upon basic moral rules. But Bowie goes further. He claims that every society ought to follow the basic rules of a marketplace economy. In doing so he supports the position of Milton Friedman, that the marketplace economy best supports personal freedom. For example, freedom of speech is supported when there are alternate job opportunities. Without such opportunities, the threat of losing a job because of what one says is more intimidating and so more likely to lead to speech restrictions. Bowie suggests that capitalism promotes democracy; when multinational companies do business in a country under a dictatorship, a government may tend to become less repressive. However, Bowie seems to recognize that doing business in a repressive country could actually do more harm than good. By making an economy stronger, the governmental status and power, through taxation, could increase. To combat this, Bowie supports the Sullivan principles.
In 1977 the Rev. Leon Sullivan, a South African minister who sat on the board of directors of General Motors devised a set of guidelines for multinational corporations for doing business in the then repressive climate of South Africa. South Africa had in place a strict and harsh system of racial separation called apartheid. Sullivan called upon multinationals in South Africa to call for universal human rights and to maintain a policy of racial equality within the company. Such principles were to put pressure on South Africa to eliminate Apartheid, finally accomplished in 1994. Whether or not the Sullivan principles helped to eliminate apartheid is unclear. Nevertheless, the fact that the principles appealed to are universal in nature supports Bowie idea that the ethical relativism should not dominate business activities in host countries.
We might add that Rev. Sullivan proposed a global set of principles in 1999. The Global Sullivan Principles are endorsed by many multinational companies.