How Do Business Ethics Differ Among Countries?

Business ethics are a matter of fair dealing and moral behavior but the practical implications are not lofty: The purpose of business ethics is to establish trust between people doing business. Over time, the reputation of a business is built on its demonstrated pattern of ethical (or unethical) behavior.

A company's business ethics should be codified in policies that cover a wide range of practices and pitfalls regarding corporate governance, insider trading, bribery, discrimination, social responsibility, and fiduciary responsibilities.

But business ethics are not universally the same. As a business expands internationally, it may come across standards that are different from its own, for better or for worse.

Setting Standards

Business ethics are shaped and guided by the laws of the company's home country. In some cases, these laws provide a base point such as a minimum wage, environmental standards, and worker safety regulations.

Other laws set broad responsibilities and requirements for honesty and fair dealing. Some companies strive to be the gold standard for business ethics in their industry, while others do the bare minimum that is legally required.

Whether a business is dealing with a partner or a new customer, business ethics indicate that the same standard of behavior should be adopted when doing business with any client anywhere.

The Global View

A company that decides to expand internationally may find it necessary to revisit its ethics rules to make certain they cover unexpected situations that may occur. Business ethics can differ in other countries and even between industries.

Business practices that would be illegal, or at least frowned upon, at home are often allowed or at least tolerated elsewhere.

Key Takeaways

  • A company can choose to adapt its business ethics for each country in which it does business.
  • It should be remembered that the behavior of a company and its employees will be judged by the ethical standards of its home country.
  • The least risky choice is to implement the same standards everywhere.

Many developing nations have lax insider trading laws. In some Latin American countries, bribery and kickbacks are a regular part of doing business.

Some countries have much lower environmental standards and workplace safety standards for doing business than the U.S., while others have higher standards.

An Ethical Dilemma

Two approaches can be taken when doing business in foreign countries. A business can operate internationally with the same policies and procedures it developed at home, or it can adapt its own practices to the norms of each country in which it operates.

At the very least, adjustments to foreign standards that are higher than those in the home country must be adopted when doing business there. In Germany, employees are legally entitled to a minimum of 24 vacation/holiday days per year. In France, workers have a four-day workweek. The U.S. has no federal requirement for time off.

Establishing the same standards in offices worldwide can be the best course. Management and rank-and-file employees are less likely to engage in risky, dubious, or illegal behavior if it is explicitly forbidden in a company’s written policies and procedures. A company can ensure compliance by mandating that all employees read and sign its policies and procedures.

The Hazards of Adapting

The second approach is for a company to establish different policies and procedures for business ethics in foreign countries.

One danger in this approach is that the behavior of a company and its employees will inevitably be judged by the ethical standards of its home country. For instance, child labor is acceptable and normal in some nations but is both illegal and unacceptable in the United States. Multinational companies that have been found to be using child labor abroad have been judged harshly by their American customers.

A company needs to establish its management philosophy. The terms management style and management philosophy are often used interchangeably, but they are not the same. Your management style is how you manage your workforce. Your philosophy is why you manage your workforce that way.

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