Corporate social responsibility (CSR) encompasses the economic, legal, ethical, philanthropic and discretionary expectations that society has of a firm at a given point in time. Until very recently, most firms viewed business ethics only in terms of administrative compliance with legal standards and adherence to internal rules and regulations in international business transactions. In today’s environment, it is imperative to pay attention to business ethics around the world and firms must earn the respect and confidence of their customers in order to succeed. Legal and ethical behavior are of paramount importance and companies and individuals alike are being held increasingly accountable for their actions, as demand grows for higher standards of corporate social responsibility.
While business ethics emerged as a field in the mid-19th century, international business ethics did not emerge until three decades ago. Managers and researchers have since then begun focusing on infinitely more complex issues in the international marketplace as value judgments differ widely amongst culturally diverse groups. There are several issues that have become salient such as comparison business ethical transactions from various religious perspectives, varying global standards, e.g., such as the use of child labor, the way multinationals take advantage of international differences, such as outsourcing production and services to low-wage countries, the permissibility of global business transactions with pariah states, and an overall search for universal values as a basis for international business transactions.
The rapid pace of globalization in the last decade has compelled multinational enterprises to leverage their resources to alleviate a wide variety of social problems. The pharmaceutical industries have priced their drugs well below market price in developing nations to avoid negative publicity, whereas those engaged in manufacturing have restricted environmental pollution regardless of the local laws and customs.
Furthermore, multinationals should not adversely disturb the balance of payments or currency exchange rates of the countries in which they do business. They should reinvest some of their profits in the countries in which they operate, and should resolve disputes arising from expropriation by host governments under the domestic laws of those countries. They should also reduce solid waste by incorporating recycling into their manufacturing processes.
Corruption And Bribery
In addition to taking a proactive stance in practicing appropriate business ethics etiquette as described above, businesses should also avoid certain forms of business practices that are a deviation from the sound practices of business policy, such as corruption, bribery, extortion, lubrication, subornation and agent’s fees among other undesirable practices.
Corruption involves an illegitimate exchange of power into material remuneration mostly on the part of officeholders who take advantage of their position to grant undeserving favors. Not all forms of corruptions are likely to violate the law, and the semantics of the word can vary considerably around the world. Making profits, individualism, rampant consumerism are considered corruptions in many parts of the world. Transparency International publishes the annual Corruption Perception Index, and Nordic countries (e.g., Denmark, Finland, Sweden, Norway, and Iceland), New Zealand and Singapore are typically found to be the least corrupt countries in the world. The organization also publishes the annual Bribe Payers Index, and the lowest levels of bribe paying are usually found in Switzerland, Sweden, Australia, Austria, and Canada.
While voluntary offered payment by an individual seeking unlawful advantage is considered bribery, extortion refers to payments that are extracted under duress by someone in authority from a person seeking only what he or she is entitled to. Yet another variation of bribery is the difference between lubrication and subornation. While the former involves a relatively small sum of cash, a gift or a service given to a low-ranking official in a country where such offerings are not prohibited by law, subornation, in contrast, involves offering large sums of money—frequently not properly accounted for—designed to entice an official to commit an illegal act on behalf of the person offering the bribe. A final form of payment, an agent’s fee, is paid to an individual to represent the company in that country. This form of payment is not necessarily a bribe, although it may be construed to be one under some circumstances.
Ethical behavior should be the trait of every firm not only in their domestic transactions, but in their international ones as well. Perhaps the best guides to a litmus test of whether or not something is ethical is based on utilitarian ethics, i.e., whether the actions of the company or the individual optimizes the benefits of all constituencies, rights of the parties, i.e., does the action respect the rights of the individuals, and justice or fairness, i.e., does the action respect the principles of justice or fairness to all stakeholders involved? Answers to these questions will shepherd businesses and individuals navigate through challenging international business transactions in the 21st century.
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