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Doing the Right Thing: Ethics in Modern Business
Principles of Management · Chapter 16: Global Management and Cultural DiversitySection 16.7 · lesson 110 of 11712 min · free with a free account
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In this lesson
Ethics when standards differ across borders.
- Explain the problem created by differing standards across jurisdictions
- Compare relativism, absolutism, and the core-and-context position
- Describe the anti-corruption framework for international business
- Analyze a described cross-border ethical situation
Transcript
Everything said in the video, section by section (1,545 words). Read along, or search it.
Global Management and Cultural Diversity
Doing the Right Thing
Some business conduct is lawful and customary in one country, and unlawful in the next. An organization operating in both has to decide which standard governs what it does. This section closes the chapter with ethics, specifically as it arises across borders. We'll set out three positions on differing standards, each at full strength, and the practical difficulty each one faces. We'll look at the core-and-context approach most organizations actually use, and the hard question it leaves open. Then the anti-corruption framework, facilitation payments, and the compliance architecture that addresses corruption risk. We'll treat supply chain standards as the contested question they are. And we'll finish with a manager asked to authorize a payment that was customary locally, but prohibited at home.
The Distinctive Problem
When Two Standards Disagree
International business ethics confronts a distinctive problem. Conduct that's lawful and customary in one jurisdiction may be unlawful, or unacceptable, in another. An organization operating across both jurisdictions at once must decide which standard governs its own conduct. And here's the uncomfortable part. That decision can't simply be avoided. An organization that genuinely operates in both places will have to act. Some concrete action must ultimately be taken, one way or the other. Even doing nothing is a choice about which standard wins. So the question isn't whether to take a position. It's which position, and on what grounds.
3 Positions
Each Stated at Full Strength
Three positions address this problem. Each is stated here at its strongest, and no position is taken. Ethical relativism holds that the local standard should govern. Conduct should be judged by the norms of the place where it occurs. Its strongest argument is respect. If a community hasn't adopted an outside standard, imposing it is itself a form of disrespect for that community's values. Ethical absolutism holds that the home standard should apply everywhere. Its critics call it ethical imperialism. On this view, certain ethical requirements aren't matters of local preference at all. An organization shouldn't compromise them just because it's operating somewhere that would tolerate the compromise. The intermediate position holds that certain core standards are non-negotiable. Other practices, meanwhile, may legitimately vary by context. It combines the insights of relativism and absolutism, while avoiding what each would require, taken to its full extreme.
Practical Difficulties
Where Each Extreme Struggles
Each extreme position runs into a practical difficulty. Relativism's difficulty is real. It provides no basis for refusing anything. In principle, any practice can be justified by pointing to a local standard that permits it. It also makes an assumption. It assumes the local practice is genuinely endorsed by the people subject to it. But a practice may instead be imposed on them, by an unequal distribution of power within that local context. That assumption doesn't always hold, and relativism's own logic offers no way to examine it. Absolutism's difficulty is equally real. It can prevent legitimate adaptation to genuine local difference, difference that has nothing to do with any core ethical principle. And it assumes the home standard is correct. The home standard may simply reflect the organization's own familiar starting point, rather than a genuinely superior ethical position.
Table 16.7.1
The 3 Positions Side by Side
Table sixteen point seven point one sets the three positions side by side. For each, it gives the strongest argument, the principal objection, and what the position would require. Relativism respects local values, rather than imposing an outside standard. Its objection is that it gives no basis for refusing any practice a local standard permits. It would require following the local standard, as the community itself applies it. Absolutism holds that certain requirements aren't matters of local preference. Its objection is that it can block legitimate adaptation, and assumes the home standard is correct. It would require applying the home standard, regardless of local practice. Core-and-context combines both insights, while avoiding either extreme. Its objection is that it needs a genuinely defensible account of what belongs in the core. It would require applying a defined, non-negotiable core, and adapting everything else.
Core and Context
The Working Approach
In practice, most organizations adopt the core-and-context distinction as their working approach. A defined, non-negotiable core of standards applies everywhere. Other practices are treated as legitimately variable, depending on context. That sounds tidy, and it's genuinely workable. But it raises a genuinely hard question. What belongs in the core? That question is named here as unresolved, rather than settled. That's consistent with the real, ongoing disagreement among the three positions. Notice where the disagreement goes. It doesn't disappear. It moves into the argument about the core's boundary. So adopting core-and-context doesn't end the ethical debate. It focuses it.
Anti-Corruption Law
Corruption and Bribery Across Borders
A significant legal framework applies specifically to corruption and bribery in international business. In the United States, the principal statute is the Foreign Corrupt Practices Act. It's enforced by the Department of Justice, and by the Securities and Exchange Commission. Its defining feature is extraterritorial reach. The statute can apply to conduct outside the United States, where a sufficient jurisdictional connection exists. So an organization can't simply assume the statute's reach stops at the US border. More generally, many jurisdictions now have comparable anti-corruption laws. And enforcement cooperation between them has grown over time. The result is overlapping legal exposure, across several jurisdictions at once, rather than a single governing standard. All of this is stated at the general level this course covers. Applying these laws to a specific set of facts genuinely requires qualified legal advice, which this course doesn't provide.
Facilitation Payments
A Category That Has Narrowed
One category deserves separate attention. Facilitation payments. These are small payments, historically made to secure routine government action. The key word is routine. The official is already obligated to perform the action. Facilitation payments occupy a specific legal category, and its treatment has narrowed over time. Under some legal frameworks, they were once more broadly tolerated, or even explicitly exempted. In many jurisdictions, they've since become subject to tighter restriction, or outright prohibition. Be careful about what's being claimed here. This describes the trend in the legal category. It isn't a definitive statement of any specific jurisdiction's current rule. For that, as with the wider framework, a real situation needs counsel.
Compliance Architecture
5 Elements That Address Corruption Risk
How does an organization actually manage corruption risk? A practical compliance architecture has five elements. First, a clear policy, stating the organization's actual standard. Second, training, so employees genuinely understand that standard, and how it applies to their own work. Third, due diligence on third parties and agents. This matters because an organization can face real exposure through intermediaries acting on its behalf. Its own direct employees aren't the only route to exposure. Fourth, books and records requirements. These make sure transactions are accurately documented, rather than disguised. Fifth, reporting channels that let employees actually raise a concern when they encounter one. Notice how the elements depend on one another. A policy nobody is trained on, or a concern with nowhere to go, leaves the architecture standing only on paper.
Supply Chain Standards
A Genuinely Contested Question
Supply chain standards raise a genuinely contested question. It concerns labor conditions, safety, and environmental practice, in supplier operations the organization doesn't directly control. Two positions are worth stating. One holds that an organization bears real responsibility for conduct throughout its supply chain. It benefits economically from that conduct, and it often has genuine leverage to influence it. The other holds that responsibility should attach primarily to the party actually engaging in the conduct. On this view, an independent supplier's operations can't be controlled the way the organization controls its own. Whichever position an organization holds, the practical tools are the same. Supplier audits, public reporting, and independent verification. These are the auditing and transparency mechanisms organizations use to address the question in practice.
Figure 16.7.1
3 Tiers, Declining Visibility
Figure sixteen point seven point one follows a supply chain at Harborline Manufacturing, across three tiers. A Tier one supplier has a direct contract with Harborline, and high visibility. A Tier two supplier is subcontracted. Visibility is moderate. A Tier three supplier provides raw material. Visibility is low. Harborline may never interact with a Tier three source directly at all. So visibility declines sharply, as the chain extends away from the organization. Here's the important consequence. The responsibility question doesn't resolve as you move further out. It sharpens. Each tier further removed from the organization's own direct control makes the question harder.
Case Vignette
A Payment Customary Locally, Prohibited at Home
Here's a composite case, constructed for instruction. Devika was a regional manager at Harborline Manufacturing. A local government contact asked her to authorize a payment, to expedite a routine permit approval. Her local colleagues described the payment as a widely accepted, customary practice in that market. Devika recognized that, whatever its local acceptance, the payment appeared to fall squarely within prohibited conduct. The anti-corruption law her organization was subject to prohibited it, regardless of local custom. Rather than deciding the question herself, she declined to authorize the payment. Then she escalated the situation through Harborline's compliance reporting channel. That's the compliance framework functioning as intended. The policy had given her a clear standard. The reporting channel gave her somewhere to escalate a genuinely difficult situation, rather than deciding alone under local pressure. Whatever position you take on relativism versus absolutism in the abstract, Harborline had already settled this case. As a matter of organizational policy, this category of payment sat within its non-negotiable core. That closes Chapter sixteen. Chapter seventeen develops the general frameworks underneath these cross-border questions. Ethical culture and codes of conduct, stakeholder theory, corporate social responsibility, and sustainability.
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