Conducting business internationally involves more than currency, time and language differences. Different societies have different expectations regarding how things get done—what is permissible and what is not. Add to that variations in political and legal systems and competitive pressures and the line between ethical and unethical business practices can be difficult to identify. In this section, we will discuss the ethical issues of operating in a global environment and the laws, organizations and groups working to enforce codes of conduct and hold businesses responsible for their business practices and the health, safety and welfare of employees throughout their supply chain.
When a large corporation decides to enter a foreign market, it must usually secure a number of licenses, permits, registrations, or other government approvals. Certain types of business may be even be impossible or illegal unless the corporation is first able to obtain a change or adjustment to the nation’s laws or regulations. Since the power to authorize the foreign corporation’s activities is vested in the hands of local politicians and officials, and since corporations have access to large financial resources, it should not be surprising that some corporate executives resort to financial incentives to influence foreign officials. While certain financial incentives, such as promises to invest in local infrastructure, may be legitimate, any form of direct payment to the foreign official that is intended to influence that official’s public decisions will cross the line into bribery.
Bribery is one of the archetypal examples of a corporation engaged in unethical behavior. A number of problems can be attributed to business bribery. First, it is obviously illegal—all countries have laws that prohibit the bribery of government officials—so the foreign company engaging in bribery exposes its directors, executives, and employees to grave legal risks. Second, the rules and regulations that are circumvented by bribery often have a legitimate public purpose, so the corporation may be subverting local social interests and/or harming local competitors. Third, the giving of bribes may foment a culture of corruption in the foreign country, which can prove difficult to eradicate. Fourth, in light of laws such as the U.S. Foreign Corrupt Practices Act (FCPA) and the Organization of Economic Cooperation and Development (OECD) Convention on Anti-Bribery (discussed in greater detail below), bribery is illegal not only in the target country, but also in the corporation’s home country. Fifth, a corporation that is formally accused or convicted of illicit behavior may suffer a serious public relations backlash.
Despite these considerable disincentives, experts report that worldwide business corruption shows little signs of abating. Transparency International (TI), a leading anticorruption organization based in Berlin, estimates that one in four people worldwide paid a bribe in 2009. It appears that the total number of bribes continues to increase annually. The World Economic Forum calculated the cost of corruption in 2011 at more than five percent of global GDP (US$2.6 trillion) with more than $1 trillion paid in bribes each year.
Governments and intergovernmental organizations have redoubled their efforts to combat the perceived increase in international business corruption. Globalization, which accelerated in the final decades of the twentieth century, is often cited by specialists as contributing to the spread of corruption. Corporations and businesses in every nation have become increasingly dependent on global networks of suppliers, partners, customers, and governments. The increased interaction between parties in different countries has multiplied the opportunities for parties to seek advantage from illicit incentives and payoffs. Although outright bribery is clearly unethical and illegal, there is great deal of behavior that falls into a gray zone that can be difficult to analyze according to a single global standard. When does a business gift become a bribe? What level of business entertainment is “right” or “wrong”? Over the past two decades, governments and regulators have sought to clearly define the types of behavior that are considered unethical and illegal.
Another factor that has heightened the sense of urgency among regulators is the magnitude of recent cases of corruption (several of which are described in greater detail below). The cost to shareholders as well as stakeholders and society has proven enormous. Governments and international organizations have ramped up their enforcement of anticorruption laws and sought increasingly severe penalties, sometimes imposing fines amounting to hundreds of millions of dollars. Largely as a result of these efforts, most multinational corporations have developed internal policies to ensure compliance with anticorruption legis
From factory working conditions at the turn of the 20th century, to today’s emphasis on diversity training, the history of workplace ethics is the ongoing story of the relationship between employees and employers.
Ethical Issues in Business
According to the Global Business Ethics Survey of 2018, employees (40%) believe that their company has a weak leaning ethical culture, and that little progress has been made to mitigate wrongdoing. Here are some of the ethical issues in business and real-world cases of how these ethical issues have affected companies.
1. Accounting
“Cooking the books” and otherwise conducting unethical accounting practices is a serious problem, especially in publicly traded companies. One of the most infamous examples is the 2001 scandal that enveloped American energy company Enron, which for years inaccurately reported its financial statements and its auditor, accounting firm Arthur Andersen, signed off on the statements despite them being incorrect. When the truth emerged, both companies went out of business, Enron’s shareholders lost $25 billion, and although the former “Big Five” accounting firm had a small portion of its employees working with Enron, the firm’s closure resulted in 85,000 jobs lost.
Although the Federal Government responded to the Enron case and other corporate scandals by creating the Sarbanes-Oxley Act in 2002, which mandates new financial reporting requirements meant to protect consumers, the “Occupy Wall Street” movement of 2011 and other issues indicate that the public still distrusts corporate financial accountability.
2. Social Media
The widespread nature of social media has made it a factor in employee conduct online and after hours. Is it ethical for companies to fire or otherwise punish employees for what they post about? Are social media posts counted as “free speech”? The line is complicated, but it is drawn when an employee’s online activities are considered disloyal to the employer, meaning that a Facebook post would go beyond complaining about work and instead do something to reduce business.
For example, a Yelp employee wrote an article on Medium, a popular blogging website, about what she perceived as awful working conditions at the influential online review company. Yelp fired her, and the author said she was let go because her post violated Yelp’s terms of conduct. Yelp’s CEO denied her claim. Was her blog post libelous, or disloyal conduct, and therefore a legitimate cause for termination? In order to avoid ambiguity, companies should create social media policies to elucidate what constitutes an infringement, especially as more states are passing off-duty conduct laws that prohibit an employer’s ability to punish an employee for online activities.
3. Harassment and Discrimination
Racial discrimination, sexual harassment, wage inequality – these are all costly ethical issues that employers and employees encounter on a daily basis across the country. According to a news release from the Equal Employment Opportunity Commission (EEOC), the EEOCC secured $505 million for victims of discrimination in private sector and government workplaces in 2019. The EEOC states that there are several types of discrimination, including age, disability, equal pay, genetic information, harassment, national origin, race, religion, retaliation, pregnancy, sex and sexual harassment.
One type of discrimination, families responsibilities discrimination (FRD), has had an increase in cases of 269% over the last decade, even as other forms of employee discrimination cases have decreased. FRD is found in every industry and at every level within the company, according to a 2016 report by the Center for WorkLife Law at the UC Hastings College of Law. The report defines FRD as “when an employee suffers an adverse employment action based on unexamined biases about how workers with caregiving responsibilities will or should act, without regard to the workers’ actual performance or preferences.” FRD includes many types of family responsibilities and caregiving, including pregnancy and eldercare. For example, a father being fired for wanting to stay home to care for his sick child, or a pregnant employee not being allowed to take a break even though it was her doctor’s orders.
These cases are expected to continue to rise due to the growing number of family members who have disabilities, the increase in people 65 and older who need care, the increase of men who are becoming caregivers, and growing expectation for employees that they can work and provide family care. Employers will need to adjust to these employee perspectives and restructure how work can be accomplished to reduce FRD.
4. Health and Safety
The International Labour Organization (ILO) states that 7,397 people die every day from occupational accidents or work-related diseases. This results in more than 2.7 million deaths per year. According to the Occupational Safety & Health Administration, the top 10 most frequently cited violations of 2018 were:
- Fall Protection, e.g. unprotected sides and edges and leading edges
- Hazard Communication, e.g. classifying harmful chemicals
- Scaffolding, e.g. required resistance and maximum weight numbers
- Respiratory Protection, e.g. emergency procedures and respiratory/filter equipment standards
- Lockout/Tagout, e.g. controlling hazardous energy such as oil and gas
- Powered Industrial Trucks, e.g. safety requirements for fire trucks
- Ladders, e.g. standards for how much weight a ladder can sustain
- Electrical, Wiring Methods, i.e. procedures for how to circuit to reduce electromagnetic interference
- Machine Guarding, e.g. clarifying that guillotine cutters, shears, power presses and other machines require point of operation guarding
- Electrical, General Requirements; i.e. not placing conductors or equipment in damp or wet locations.
Physical harm isn’t the only safety issue to be aware of, though. In 2019, an ILO report focused on rise of “psychosocial risks” and work-related stress. These risks, which include factors like job insecurity, high demands, effort-reward imbalance, and low autonomy, have been associated with health-related behavioral risks, including a sedentary lifestyle, heavy alcohol consumption, increased cigarette smoking, and eating disorders.
5. Technology/Privacy
With developments in technological security capability, employers can now monitor their employees’ activity on their computers and other company-provided electronic devices. Electronic surveillance is supposed to ensure efficiency and productivity, but when does it cross the line and become spying? Companies can legally monitor your company email and internet browser history; in fact, 66% of companies monitor internet connections, according to 2019 data from the American Management Association. 45% of employers track content, keystrokes and time spent on the keyboard, and 43% store and review computer files as well as monitor email. Overall, companies aren’t keeping this a secret: 84% told employees that they are reviewing computer activity. Employees should review the privacy policy to see how they are being monitored and consider if it can indicate a record of their job performance.
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