This is a solution of International Environment Assignment in which we discuss Developing business
An analysis of the moral and ethical issues faced by organizations operating in an international environment
A lot of changes have taken place in the way business is conducted in today’s world. These changes can be seen in all the areas and functions of any business, starting from the nature and style of management to the motive behind operating a business.
The growing concerns against the negligent behavior of the businesses environment have resulted in several changes being introduced in the last fifty years. Apart from making profits, the businesses were expected to follow certain socially acceptable practices as well as they were expected to be held morally responsible and accountable for their actions with respect to the society, environment in which they operate and the overall well-being of all those involved with the business. This growing concern has resulted in what is known as business ethics in today’s business world.
Since the last three decades, businesses have addressed business ethics in different forms, like introduction of compliance programs and managers, development of codes of conducts and also by providing training on behavioral issues. However, despite all these efforts, the issue of ethics in business is still a matter of heavy debate and lots of studies are being conducted on the various issues associated with ethics in business.
Understanding business ethics can be a difficult task. The field is very diverse and covers a lot of issues like corporate governance, morality, reputation business management, fair laborpractices etc. In fact, business ethics addresses the entire scope of responsibilities that a company has to each of its stakeholders, and it is also about the process of management, the relationships between managers and the relationships between managers and other employees (Harrison, 2005:12). Further, the concept of business ethics incorporates the issues like corporate responsibility, social responsibility, corporate compliance etc.
The ethical issues in international business are:
- Employment: work conditions of a company might be different in the host country than what is in their home country. Company then needs to decide on which work conditions they would like to implement- host country, home country or something in between.
- Corruption: government officials are often paid bribes by companies to gain business. The US Foreign Corrupt Practices Act was passes to fight corruption. But what is considered ethical in one country cannot be treated as same in another. E.g. in developing countries like India, China etc. it is common practice to bribe officials, however this cannot be tolerated in other countries and businesses will have to face severe consequences if they indulge in such practices.
- Human Rights: basic human rights are not accepted in many countries and are taken for granted in many places which are not universally acceptable.
- Environmental regulations or pollution: when environmental regulations in the host country is inferior to that in the home country, ethical issues arise in form of high levels of pollution, overuse of common resources etc.
- Moral Obligations: companies are not free from fulfilling moral obligations. Laws are one of the ways to make companies behave morally by returning something beneficial back to the society.
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Additional moral and ethical issues faced by companies in international business:
- Doing business transparently
- Abstaining from tax avoidance procedures
- Fighting against corruption and bribery
Triple Bottom Line
Organizations often think about how to serve their customers and society, but their focus on business have always been on the ‘bottom line’. Lately, a new observation to the bottom line has emerged to what is known as Triple Bottom Line.
If organizations want to achieve success, they should consider the Triple Bottom Line: economic, environmental and social which is also known as 3 Ps: Profit, Planet and People.
An effective CSR must reflect the configuration of these with the organization’s business strategy, values and sustainability.
Ways to improve moral and ethical issues faced by organizations operating in an international environment:
- Avoid any deliberate harm to the environment and society
- Follow the government regulations in the host country and cooperate with their government
- Pay fair share of taxes in line with the tax regulations
- Respect the host country’s cultural beliefs and norms
- Make contributions to the development of the host country
- Respect human rights of the company’s employees
An analysis of the conflicts between corporate strategy and ethical and social responsibilities
“Corporate Social Responsibility (CSR) refers to good citizenship by the firm- i.e., its obligations to society, particularly when society is affected by the firms strategies and practices” (Verbeke,2009:383)
CSR assist businesses to be like good citizens, i.e. to contribute to society in a beneficial way, by avoiding any harm and ethically relating to their stakeholders, employees, suppliers and the entire community.
Carroll’s CSR Pyramid
The components of Carroll’s CSR pyramid are:
- Consistent performance with maximum earnings per share
- Maintaining a strong competitive position
- Maintaining a high level of operating competence
- Consistent performance with meeting expectations of law and government
- Complying with various legal authorities
- Being a law enduring corporate citizen
- Consistent performance with meeting expectations of social and ethical norms
- Respecting the new and evolving ethical norms ibn the society
- Preventing ethical norms from being compromised
- Consistentperformance with philanthropic expectations of society
- Importance of manager to participate in charitable activities
- Providing assistance to educational institutes
Roles of business in society
The Shareholder Model
As a business flourishes in a society, it needs to maintain a good relationship with its stakeholders. Employees, customers and suppliers are the most influential stake holders of a business with media, local residents, trade unions, government authorities having extensive range of impact on business. Analysis of a society from a stakeholder point of view often helps business strategy to determine risk and future opportunities.
The Shareholder Model
This model focuses on the idea that the main purpose of a business is to make profit for its owners thereby increasing the wealth of the shareholders.
This model believes that excessive legal regulations are not necessary while doing business in a society and that their attempt to maximize wealth, the society at large will also be befitted.
Advantages and Disadvantages of CSR
The incorporation of CSR in businesses is generally viewed as a positive object in many companies. Apart from the benefits of increase in company transparency, a positive consumer image of being a good corporate citizen, there are also certain disadvantages to CSR.
- Better reputation
- Increased customer loyalty
- Greater worker productivity
- Difficulty in getting return on investments from social and environmental programs
- Hesitance from shareholders to put in money in business for serving CSR programs
- Expensive requirements on companies to focus on CSR
Identification of the legislation/ regulation and guidance relating to corporate social responsibility for organizations
CSR activities differ among countries. What is seen common CSR activity in one country will not be seen as important and common in another country. The most common CSR activities that companies indulge in are:
- Involving relevant stakeholders especially employees in determining what success will be and what their part would be in achieving it.
- Determining policies and procedures on specific concern areas like complaints, environment, human rights etc.
- Providing essential training to employees to help them take the necessary action including training on CSR and ethics.
- Fighting corruption and bribery especially if the business is operating in areas prone to these.
- Providing clear and decent product information with regards to product quality, safety etc.
- Ensuring that the products and services are safe to human health as well as the environment
- Promoting environmentally friendly products
- Guaranteeing fair prices to all consumers
- Attending the employees and including them in communication between managers and staff
- Providing provisions for training and development opportunities for employees
- Encouraging a diverse workforce through training, providing equal opportunity workshops etc.
- Ensuring equal benefits for all employees
- Providing flexible working hours
- Encouraging and promoting health and safety in the workplace
- Helping charities and community organizations by giving gifts of cash or other forms
- Sponsoring events, sports club etc. keeping brand promotion in mind
- Allowing employees time to do social work
- Using green or more efficient technologies
- Reusing and recycling materials
- Minimizing packaging to decrease the amount of consumer waste
- Efficient use of transportation of goods and logistics
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