Global Strategic Operations

Global strategic operations Importance of ethics in the business world is superlative and global. The recent expansion of global business and fall of trade barriers worldwide have further underlined the interest in international ethical behavior and social responsibility As MNCs expand globally and enter foreign markets, ethical conduct of officers and employees assume added importance. Certain legislations have been incorporated which provide important ethical behaviors in international business. For e.g foreign corrupt practices act 1977, Sarbanes-Oxley act of 2002. While business ethics emerged as a field in the 1970s, international business ethics did not emerge until the late 1990s, looking back on the international developments of that decade. Theoretical issues such as cultural relativity of ethical values receive more emphasis in this field. Ethical issues:  The search for universal values as a basis for international commercial behavior.  Comparison of business ethical traditions in different countries. Also on the basis of their respective GDP and [Corruption rankings].  Comparison of perspectives.

business

ethical

traditions

from

various

religious

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Ethical issues arising out of international business transactions; e.g. bioprospecting and biopiracy in the pharmaceutical industry; the fair trade movement; transfer pricing.

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Issues such as globalization and cultural imperialism.

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Varying global standards - e.g. the use of child labor.

 The way in which multinationals take advantage of international differences, such as outsourcing production (e.g. clothes) and services (e.g. call centers) to low-wage countries.  The permissibility of international commerce with pariah states. Foreign countries often use dumping as a competitive threat, selling products at prices lower than their normal value. This can lead to problems

in domestic markets. It becomes difficult for these markets to compete with the pricing set by foreign markets. In 2009, the International Trade Commission has been researching anti-dumping laws. Dumping is often seen as an ethical issue, as larger companies are taking advantage of other less economically advanced companies. A recent child labor incident BBC recently reported on Primark using child labor in the manufacture of clothing. In particular a £4.00 hand embroidered shirt was the starting point of a documentary produced by BBC's Panorama (TV series) program. The program asks consumers to ask themselves, "Why am I only paying £4 for a hand embroidered top? This item looks handmade. Who made it for such little cost?” in addition to exposing the violent side of the child labor industry in countries where child exploitation is prevalent. As a result of the program, Primark took action and sacked the relevant companies, and reviewed their supplier procedures.

Some major areas of concern are:  Environment: Environmental Reporting, Nuclear Power, Climate Change, Pollution & Toxics, Habitats & Resources  People: Human Rights, Workers' Rights, Supply Chain Policy, Irresponsible Marketing, Armaments  Animals: Animal Testing, Factory Farming, Other Animal Rights  Politics: Political Activity, Boycott Call, Genetic Engineering, Anti-Social Finance, Company Ethos  Product Sustainability: Organic, Features, Other Sustainability.

Fair-trade,

Positive

Environmental

The implications of ethics in global business operations can be better understood with the context of Acres International. Acres is a Canadian engineering firm. It was convicted of bribing an official in the southern African country of Lesotho. The situation arose after Acres hired a Lesotho engineer, Zalisiwonga Bam, as its local representative as it sought and won contracts for the Lesotho Highlands Water Project, a

massive development to generate electricity and move water from the mountains of Lesotho to South Africa. Bam, whose pay was deposited by Acres in a Swiss bank account, secretly relayed part of his fees to the director of the water project, Masupha Ephraim Sole. In July 2004, after an investigation reaching back to events in the late 1980’s, the World Bank publicly announced that they were official laying sanctions against Acres International Limited. Acres, a Canadian engineering consulting firm based in Mississauga, was found guilty of paying bribes to win contracts on a multi– billion dollar dam project in the tiny country African country of Lesotho. The Lesotho High Court convicted Acres of bribery for paying nearly $266,000 USD to Mr. Masupha Sole, the former chief executive of the Lesotho Highlands Water Project. The guilty verdict in Lesotho raises serious questions about how contracts for these megaprojects get awarded. Acres was not alone in being challenged as to its ethical practices, the French company Spie Batignolles and the Italian firm Impregilo also face disbarment from World Bank contracts. Germany’s Lahmeyer International is also scheduled to go to trial for a circumstance that ultimately involved as many as twelve large foreign firms in a highly competitive bid for a project in which hundreds of millions of dollars was at stake to the winners. Effect on Acres: The World Bank imposed a three-year ineligibility period within which Acres would not be allowed to compete for contracts financed by the World Bank. Keeping in mind that this institution is actually five banks, including the International Bank for Reconstruction and Development, the International Development Association and the International Finance Corporation, such a penalty could be considered severe since Acres is the type of company that is specifically oriented to working on large development aid projects which are predominantly structured by NGO’s like the World Bank. Ethical issues can arise when companies must comply with multiple and sometimes conflicting legal or cultural standards, as in the case of multinational companies that operate in countries with varying practices. The question arises, for example, ought a company to obey the laws of its home country, or should it follow the less stringent laws of the developing country in which it does business? To illustrate, United States law forbids companies from paying bribes either domestically or overseas; however, in

other parts of the world, bribery is a customary, accepted way of doing business. Similar problems can occur with regard to child labor, employee safety, work hours, wages, discrimination, and environmental protection laws.