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Cultural Ethics

Discuss About The Journal Of Legal Ethical Regulatory Issues.

Due to globalisation, the market for companies has expanded, and it has become easier for corporations to establish their operation in foreign countries in order to increase their customer base. While establishing and managing a business in foreign countries, there are a number of fundamental principles which are followed by businesspeople which include factors such as effective pricing strategy, appropriate distribution, world-class product development, sound marketing strategy, motivating promotion, and professional marketing research (Carroll and Buchholtz 2014). Focus on these factors is important as they provide success to businesses while operating in competitive markets. However, organisations did not focus on, or concern about the unethical nature of their business, and they avoid implementing appropriate policies in order to ensure ethical decision-making at the workplace. It is important that while managing operations in foreign countries, senior-level executives focus on ethical leadership principles in order to avoid unethical behaviour. Culture plays a crucial role in affecting the ethical decision-making of leaders, and they are requiring evaluating different cultural factors to ensure that they make ethical decisions while managing their business (Leonidou et al. 2013, p403). This report will focus on the difficulty faced by leaders while defining ethical or unethical behaviour across cultures. This report will evaluate the impact on culture in ethical decision-making and analyse how conflict occurs. Furthermore, the relationship between CSR and ethics will be discussed, and the case will be analysed from an ethical leadership perspective.

The national culture in a country consists of three factors including institutional, personal and organisational. All of these factors work together to create an ethical environment in the country and ensure the individuals and businesses comply with such ethics as well (Young and Brunk 2012). The institutional factors focus on implementing ethical legislation in the country. The personal factors include values, beliefs, moral development and self-regulation which include in a culture. Furthermore, organisational factors include code of ethics which assist in ensuring people and organisations take ethical decisions while facing ethical dilemmas. All these factors are required to comply by businesses while they are operating their operations in another country. Due to change in these factors, corporations face a number of cross-cultural issues based on which it is difficult for them to make ethical decisions (Strubler et al. 2012, p25). While managing operations in a foreign country, leaders are required to evaluate these factors because these factors provide business ethical standards which are necessary to comply by managers.

Difficulty in defining ethical or unethical behaviour across cultures

Based on compliance with business ethical standards, leaders either conduct the operations of their business ethically or unethically both of which have positive or negative consequences respectively. These factors affect the cultural ethics which are necessary to comply by leaders in foreign countries (MacCormack 2016). Cultural ethics provide factors which deal with integrity, values, morality and principles of culture and in some cases even religion. Generally, cultural ethics differs from culture to culture; however, some values in the culture remains the same irrespective of the fact that cultures are different because they are ethically and morally justifiable. Cultural ethics referred to the values and morals which society follow in culture, therefore, they play a significant role in the governance of the society and organisations. Culture has a significant impact on ethics and vice versa. Both of these factors affect the community along with its development, progress, principles, laws and to a certain extent its policies (Lowry et al. 2014, p389).

Along with globalisation, the importance of cultural ethics has grown as well, and while managing their operations in difficult countries, leaders rely on cultural ethics to take ethical business decisions. However, it does not mean that leaders should blind comply with cultural ethics while managing their operations in foreign countries (Demuijnck 2015, p825). They are required to critically evaluate whether compliance with such cultural ethics is necessary and whether they will benefit the society and the company. As discussed above, certain morals and values remain same in different cultures because they are justifiable. Similarly, leaders should evaluate that whether cultural ethics comply with the moral guidelines before comply with them in order to avoid conducting any unethical behaviour in the company (Zolzer 2013, p63).

The 21st century is propelled by multiculturalism and globalisation due to which organisations focus on implementing appropriate policies in order to manage employees from different cultures which provides them a competitive advantage (Ford and Richardson 2013, p25). However, when leaders are managing operations in foreign countries, it is difficult for them to define what is ethical or unethical. Following are a number of factors based on which it is difficult for managers to define what is right or wrong while they are operating their business in another country.

  • The decisions taken by leaders are complex because they have to evaluate the interest of different stakeholders and there is no time for reflection or collection of information which is The composition of ethical decision is intense, sometimes brutal (Argandona 2015).
  • People are enslaved by results, and leaders also face high pressure to show effective In order to meet such results and achieve organisational targets, leaders did not deeply evaluate the impact of their decisions, and they focus on quickly achieving effective results by any means necessary. Thus, they avoid defining what is ethical or unethical as long as the company is not violating any laws.
  • While operating business in the foreign country, leaders face prevalence of bureaucratic culture in which they are told by their subordinates that “thing is the right thing to do” based on which it becomes difficult for them to differentiate between ethical or unethical behaviour.
  • A business is promoted by individualism in which a leader has to put the interest of the business above all. Thus, they are interested in taking decisions which are unethical but beneficial for the business rather than taking decisions which are ethical, but they could harm the interest of the business. Thus, leaders avoid differentiating between ethical or unethical behaviour (Deresky 2017).

As per my own leadership practice, following are a number of issues which are faced by leaders while expanding or managing their operations in a foreign country relating to ethical culture:

  • Should a company take investment decision to enter into a foreign country where political and civil rights are violated?
  • Should the company “go along” with the policies implemented by the host country regarding discriminatory employment practices?
  • If a company situated in a developing country and it is expanding its operations to a developing country, then should it transfer its health and environmental regulations or should it avoid them because there is no governmental pressure to comply with them.
  • If other companies are doing an unethical act which is considered as ethical in the country, then whether the company should do such act or not.

A good example is Apple Incorporation in order to understand the difficulty faced by companies in defining ethical or unethical behaviour across cultures. It is one of the largest technology companies, and it is the most valuable brand in the world. In order to manufacture its products, such as iPhone and iPad, the company outsources its operations in China to the factories of Foxconn. Apple is considered one of the most influencing companies in the world because it focuses on providing high-quality services to its customers while at the same time taking appropriate actions to protect the environment as well. It also provides better growth opportunities for its employees and an open and positive workplace environment. However, the company did not take a similar approach when it comes to its factories in China. There have been a number of incidents in which Foxconn has been involved in unethical behaviour towards its employees in order to meet production deadlines (Fullerton 2018). A number of studies have proven that employees are treated as employees in Foxconn factories, and they did not receive basic facilities which are necessary for an employee to live a decent life.

The factory managers beat their employees in case they do not perform well, and they are fired without any notice if they speak against the policies of the company. A story posted by the Guardian showed the life of Foxconn employees and how badly they are treated by the company (Merchant 2017). Furthermore, a large number of employees have committed suicide in the factory by jumping off the building, and in order to prevent such suicides Foxconn has installed net around the houses given to factory workers. Apple is one of the most ethical companies in the world yet still the corporation failed to meet the basic ethical standards when it comes to employees who work for the company in China. It is a good example of the phrase “When in Rome, do as the Romans do”. Due to lack of effective employee policies in China, Apple failed to take the ethical decisions and focused on increasing its profitability (Smith 2016). This example shows that it is difficult for an even large enterprise to differentiate between what is ethical or unethical across cultures. It is a culture in China that employees are treated as machines, and rather than taking corrective and ethical decisions, Apple goes with the flow which assists the company in increasing its profitability.

Culture plays a crucial role in influencing the decisions of a company, and it affects the ethical decision-making as well. The main foundation of ethical decision-making is based on choice and balance; these factors guide the leaders in discarding wrong choices in favour of good once. Thus, one of the key questions which are asked by the leader while making an ethical decision is that ‘what would a reasonable person do in this situation’. Ethical thinking involves the intricate process which is used by leaders to consider the impact of their actions on the people and institution that they are serving (Gerasimova 2016). While performing daily business operations, it is expected that leaders will face ethical dilemmas when unusual situation occur and in those situations, immediate response from the leader is needed. These situations occurred due to changes in the cultures which the leader is aware off (Hartman, DesJardins and MacDonald 2014). Thus, culture has a significant impact on the ethical decision-making process. While making business decisions to ensure that they are focused towards achieving common business objectives, leaders have to ensure that they consider the difference between cultures and other attributes (Craft 2013, p234). In the biggest organisational based study conducted on IBM, Hofstede provided that different countries have different cultural dimensions which are necessary to be evaluated by leaders since these aspects have a significant impact on the ethical decision-making of the company.

The factors include power distance, individualism vs. collectivism, uncertainty avoidance and masculinity vs. femininity. These are referred as cultural aspects which affect the ethical business law decisions of a company. Members of a certain culture accept that there is an unequal distribution between powers when it comes to institutions and organisations operating in the country (Thiel et al. 2012, p56). Uncertainty avoidance is referred to the general tolerance of people towards ambiguous situations; the higher the tolerance, the greater the willingness of employees to take risks in ambiguous situation. The individualism is referred to the tendency of people to care about them primarily, and collectivism means people’s needs to belong to certain groups, organisations or collectives. Finally, as per Hofstede, masculinity is a situation in which the dominant value of the society includes factors such as money, things and success (Shapiro and Stefkovich 2016). On the other hand, femininity is a situation in which the dominant value of the society is quality and life and caring for others. These factors show the difference in cultures in different counties and these factors are required to be evaluated by leaders while making ethical decisions in the business.

Effective management of cultural diversity in the organisation is necessary to avoid conflicts which arise due to the difference in cultures. In order to understand the reasons for arising from conflicts due to a culture, it is important to understand how culture works. Culture is multi-layered which means that what people see on the surface might not be the case and factors might change below the surface (Kocet and Herlihy 2014, p182). Thus, a generalisation of culture leads to conflicts in an organisation because managers are not able to understand the true culture based on which they are unable to make ethical decisions in the company. Culture is also constantly in flux which means that it is dynamic and conditions changes as cultural groups adopt in dynamic and unpredictable ways. If leaders continue to comply with rigid cultural policies, then it leads to conflicts, thus, they are required to continuously monitor changes in the cultural factors in order to avoid conflicts. Generally, cultures embedded in each conflict because the conflict arises based on human relationships and cultures affect the way people blame, frame and attempt to tame conflicts (Ferrell and Fraedrich 2015). Furthermore, while managing operations in a foreign country, leaders did not receive any training to effectively manage different cultural aspects in the company based on which conflicts arise at the workplace.

Business ethics is a broader topic which incorporates different aspects of ethics relating to business, whereas, corporate social responsibility (CSR) is a smaller subset of the topic. The topic of business ethics dealt with an entire range of questions relating to right and wrong in the business world. On the other hand, CSR strictly deals with the responsibility that corporation or organisation is required to fulfil towards the society rather than individuals (Tai and Chuang 2014, p117). Thus, a duty of a company towards customers comes under the topic of business ethics rather than CSR policies. The responsibilities of a company towards its employees are a part of business ethics rather than its corporate social responsibilities. It can be considered that the CSR policies loaded on the social side of a company which is focused towards helping different aspects of unprivileged section of the society (Ho, Wang and Vitell 2012, p424). CSR is a narrow concept than compared to business ethics because it answers fewer questions and it focuses on fewer topics.

Business ethics is focused towards sustaining the interest of stakeholders which are affected by the business of the corporation. On the opposite side, CSR can be used by corporations as a marketing technique to expand their customer base (Grayson and Hodges 2017). Through its CSR model, corporations focus on people who need and affords the products of the company based on which a market will be open for the corporation. The company will not only help others by complying with its CSR policies, but, it will be benefiting itself by increasing its profitability. Thus, while managing cross-cultural conflicts and making business decisions, leaders are required to evaluate the relationship between CSR and business ethics which assist them in making ethical business decisions which are focused towards the benefit of the company and society as a whole (Mueller et al. 2012, p1186).

It means that while visiting another place or foreign land, a person should follow the customs of those who already live in it. It is polite to do so and possibly advantageous for a person to abide the customs of another society when one is a visitor. Leaders cannot simply apply this principle to every situation in order to justify their actions as ethical. As discussed above, the importance of business ethics has increased among modern corporations and leaders are pressured to take ethical decisions in the business. Thus, it is unsuitable for leaders to comply with local customs of a company. However, culture has a significant impact on ethical decision-making as discussed above, and leaders are required to evaluate differences in the culture before making business decision (Valentine, Godkin and Vitton 2012, p55). While managing a business in the foreign country, leaders should comply with the principle of ‘when in Rome, do as the Romans do’ because it assists them in avoiding cross-cultural issues. By complying with local customs and policies, leaders can avoid issues which occurred in a company regarding cross-cultural issues.

Compliance with these policies assists leaders in avoiding the cultural issues faced by them which assist them in making ethical business decisions. Therefore, it is important and even beneficial for leaders to comply with local customs as given in the principle of ‘when in Rome, do as the Romans do’. However, leaders have to ensure that they did not blindly follow the customs of a foreign country in order to fit in. They should critically evaluate the customs of the foreign country in order to understand whether they are ethical or unethical (Shafaei et al. 2016, p661). In case a leader faces an ethical dilemma in which it is ethical to do a specific act in a foreign country which is unethical to do in his/her home country, then the leader should not blindly follow the local customs just because others follow them, and he/she should evaluate whether such as is right or wrong. There are certain elements which are considered as ethical globally because they are justifiable. (Crossan, Mazutis and Seijts 2013, p576) While facing an ethical dilemma, a leader should evaluate these elements to make ethical decision in the situation. Therefore, making ethical decision is not as simple as the case of when in Rome do as the Romans do.

As in-charge of a UK subsidiary which is situated in Latin America, it is important for me to understand the changes between both cultures and learn about the cultural factors of the country and its people. In order to extend the residents permit for UK employees, other managers were paying a fee of £40 to immigration officials as well which is a nominal fee. Other corporations do the same thing as well in order to extend the resident’s permits of their employees. However, it is not a legal way of doing thing, and it is not specified in the law that a fee has to be paid to the immigration officials in order to extend residents permits. Thus, according to me, it comes under the definition of bribery because a fee is helping companies to avoid legal complexities which they might face if they do not pay a fee to the immigration officials. Although £40 is a very nominal amount for a multinational company, but still it is considered as bribery which promotes corruption in the country as well.

In case the immigration officials force the companies to pay such fees, then it is considered as extortion base on which a legal action can be filed against the officials. Although it can be considered as bribery based on the ethical principles which are followed in the UK, however, culture plays a crucial role in this aspect, and it could be a cultural factor in Latin America to pay a nominal fee to officials when they are doing their job. It is important to evaluate whether it is a common culture in Latin America to pay a fee to officials. But, still, a fee which is paid without any cause is considered as bribery me. As discussed above, there are certain elements which remain common through different cultural ethics because they are justified and paying an official to avoid legal complexities is considered as bribery. Here the principle of ‘when in Rome, do as the Romans do’ cannot be applied. It is necessary to understand that small unethical behaviours such as this lead to bigger problems which affect the society. As a leader, the principles of ethical decision-making apply to this place based on which paying bribery is wrong, and the company should avoid doing it.

In case it is a cultural factor in Latin America to pay such fees, then I might face cross-cultural conflicts in the organisations and others might force me to pay the nominal fee in order to avoid legal complexities. However, in this situation, reliance on principles of ethical decision-making is important and rather than following cultural policies which are wrong a leader should make ethical decisions while facing such ethical dilemma. As a leader, I should avoid paying the fee to immigration officials and follow a proper legal procedure in order to get residents permits for UK employees. Ethical decisions lead to positive consequences and it would also in improving the society as a whole by eliminating the issues of bribery and corruption from the culture of the country. Following are different recommendations which can be used by leaders while facing a similar ethical dilemma relating to cross-cultural conflicts.

  • As discussed above, corporations should adopt a social entrepreneurship model in the business which is focused towards innovative, practical and sustainable approach towards benefits different aspect of society. In this particular scenario, not following unethical cultural policies would benefit the society in the long run by eliminating bribery and corruption from the country.
  • Leaders should learn about the cultural factors while managing an operation in the foreign country, however, they should not blindly comply with such policies. They should not follow the principle of ‘when in Rome, do as Romans do’ and they should ask questions and critically evaluate the policies from an ethical perspective to understand whether policies are beneficial for the society.
  • When managing business in a foreign country and complying with ethical business decisions, a leader should follow the basic ethical principles to ensure that the decisions taken by them are ethical. Leaders should ask themselves what a reasonable person would do in a particular situation.

Conclusion

From the above observations, it can be concluded that importance of compliance with business ethics principles has grown substantially in the past few decades. However, compliance with ethical principles while managing the operations in a foreign country requires the leaders to evaluate different cultural ethics principles in order to avoid conflicts. Leaders face a number of difficulties while defining what is ethical or unethical across cultures because each culture has different definitions of ethics and what is ethical in one country might be considered as unethical in another and vice versa. There is a significant impact of culture on the process of ethical decision-making a company because leaders are required to evaluate cultural factors in order to avoid cross-cultural conflicts. Due to change in different cultures, the risk of cross-cultural conflicts increases which affects the process of ethical decision-making in a company.

There is a relationship between business ethics and CSR policies of a company as CSR is a small subset of the business ethics which is a relatively larger topic. It is necessary that while making business decisions and managing cross-cultural conflicts, leaders should evaluate the difference between CSR and business ethics in order to make ethical business decisions. Furthermore, the principle of ‘when in Rome, do as the Romans do’ has become old and leaders should not comply with it while making ethical business decisions. Based on the case analysis, it is unreasonable to give a nominal fee to immigration officials because it promotes and supports a culture of bribery and corruption in the country. A leader should take an ethical decision in this case rather than complying with local customs which is easier for them. Various recommendations are given in the report as well to face ethical dilemmas such as adoption of a social entrepreneurship model, evaluation of cultural factors, and compliance with the ethical decision-making process. Effective compliance with business ethics and CSR policies could assist a company in sustaining its future growth and interest of its stakeholders.

References

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