As more and more business organizations assume global posture, the issue of what constitutes an ethical or unethical business conduct on the part of corporations and corporate officers has become a subject of intense debate without a generally accepted conclusion. This chapter proposes a socio-economic model for developing an ethics code of conduct in a global business environment. It considers the interaction between an organizational culture, leadership, and host country's national culture and sub-cultures, political system, and individual factors. It discusses the benefit and implications of such an integrative approach to ethical decision making.
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The increasing number of questionable business conducts uncovered in some of the most trusted corporate giants such as JP Morgan (2014); Enron (2006), Tyco in the United States among many others, has reawakened the quest for a universally accepted standard of ethical business behavior. And as more and more business organizations expand globally, the quest for a generally accepted standard of ethical business behavior or conduct assumes greater attention and urgency (Mahdavi, 2001).This quest began most notably in the 1960’s and culminated in the passage of the Foreign Corrupt Practices Act (FCPA) in 1977, and Sarbanes Oxley law in 2002. Like any problem of this magnitude, many explanations are offered to explain the plethora of ethical violations. Some blame it on a society that is losing its grip on its values. Cheavning (1984) blames it on a society that is suffering from the ravages of a metaphysical cancer, a psychological rejection mechanism that questions the possibility of any one being able to know right and wrong in absolute terms. This in turn, he reasons, destroys a culture’s ability to develop a consensus on matters of right and wrong, leading to ethical schizophrenia, many ethical faces. Others blame it on an increased pressure to gain competitive advantage in a fiercely competitive global business environment. Yet others blame it on lack of consensus in the business community on what is generally considered a globally accepted standard of ethical business conduct. However, as more companies assume global posture, there is an increasing demand for a uniform or generally accepted standard of ethical conduct across cultures.
To this end, some argue in favor of a universal standard of ethical decision-making and conduct (deontological approach), while others favor a relative and more subjective approach (teleological) that recognizes moderating circumstances such as varying society’s values, severity of consequence and cultural tolerance or influence - situational approach. This approach is anchored on the principle of moral relativism and principlism. Under moral relativism, the standards of what is right and wrong are relative to different individual and cultures (Donaldson, 1996; Frederick, 2002). Yet others argue for a virtue-based approach based on an individual judgment about what is virtuous in any given circumstance. To many, this seems to be a more realistic approach to ethical decision making, especially for business organizations that operate across nations and cultures. Even in this approach, there is considerable evidence that an individual’s standard of ethical judgment (what is right or wrong, acceptable or unacceptable, ethical or unethical) is influenced by cultural heritage and norms, religion beliefs, professional code of ethics and others (Hunt & Vitell, 1986, 1992; Laczniak, 1993).Additionally, an individual’s behavior is influenced by factors such as genetic inheritance (Wilson, 1978), religion (Harris, 1981), cultural experience and philosophical systems (Steiner, 1988).