If an organization does business in a country where corruption is expected, employees

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.

ETHICAL ASPECTS OF BRIBING PEOPLE IN OTHER COUNTRIES
 
Stephen H. Unger
Computer Science Department
Columbia University

Published in: Science and Engineering Ethics. Vol. 4, No. 4, 1998,
pp. 287-290.

Based on a presentation made at the "Ethics for Science and
Engineering Based International Industries" Conference, Durham, NC,
Sept. 14-17, 1997.

                                ABSTRACT

Some argue that individuals and organizations doing business in
countries where corruption is prevalent should not be expected to
adhere to strict standards of ethical practice.  The basis for such
arguments is faulty.  Ethics, unlike etiquette, has a universal basis;
it is fundamentally the same all over the world.  Even in a practical
sense, there are long range advantages to be gained by ethical
behavior in these situations.  Engineering employees of companies
operating in areas where corruption is common are sometimes forced to
make very difficult decisions.  

The focus in this paper is on the ethical aspects of the problem.
Laws applying to companies doing business abroad, for example the US
Corrupt Practices Act, are not discussed.

1. Defining the Problem
 
The IEEE (Institute of Electrical and Electronics Engineers) Ethics
Code clearly states that involvement in bribery is unacceptable
behavior for an engineer.  This seems to be a simple,
non-controversial, provision, and it is fully consistent with older
engineering ethics codes.  Yet it is one of the most disputed parts of
the code.  Why? The argument made is that, in various parts of the
world, activities that people in the United States would call bribery,
are routine business practices.  If those subjected to American
standards of ethics and law are prohibited from engaging in these
practices, then, the argument goes, they will be significantly
handicapped in the market place.
 
Before dealing with the fundamental issues raised by this argument and
its implications, I will first address the problem of defining
bribery.  The dictionary definition of a bribe is a payment to induce
somebody to do something that is wrong, or illegal, or that which the
bribee does not wish to do.  Listing a few examples may help clarify
the subject.





1. Paying a government inspector to overlook a defect in the wiring of
a building.

2. Paying a company purchasing agent to order parts from a particular
vendor.

3. Offering a child a piece of candy as a reward for finishing his
dinner.

Item 3 may be ignored as illustrating a meaning irrelevant to the
present discussion. Few would deny that behavior along the lines of
item 1 is unacceptable. Let us examine behavior typified by item 2,
which is where the disagreements arise.

One issue is that of magnitude. Suppose a sales engineer for a
vendor, while discussing his product with a purchasing agent over
dinner, picks up the check. Should this be considered as a bribe?
There are usually well understood rules, sometimes with the force of
law, that indicate the point at which a gift becomes a bribe. Local
customs are often relevant in determining this boundary.

Particularly when dealing with organizations (governmental or private)
in other countries, it is common to engage local agents to assist in
making contacts, in negotiating contracts, and in clarifying local
laws and customs. Such agents may be paid fixed fees or percentages
of the amounts involved in the contracts. In many, perhaps most
cases, the use of such agents is a legitimate business practice. But
agents are also used as mechanisms to pay bribes. The agent may
charge a fee for services rendered and then distributes bribes to
obtain the contracts under acceptable terms. Those employing the
agent can disclaim any responsibility for the actions of the agent.
Distinguishing between the legitimate and illegitimate use of agents
is, at least in principle, not difficult.

In some countries, employees of both government and private industry
who deal with the general public or with organizations seeking various
services, are not paid adequate salaries. It is expected that their
salaries will be incremented by side payments, sometimes called
"grease", made by those using their services. This practice is
similar to tipping. It is different from bribing in that the payments
are made, not to induce people to do something wrong, but rather to
get them to do what they are supposed to do. In some situations, for
example where grease payments are necessary to get customs officials
to release legitimate shipments into a country, the situation takes on
the flavor of extortion. In effect, the shipper is threatened with
costly artificial delays unless grease is paid. It does not seem
reasonable to charge those making such payments with bribery. At
worst they may be criticized for encouraging an improper practice by
yielding to pressure.

Another aspect of these situations is secrecy. When payments are made
in secret, this is a strong, if not infallible, indicator that they
are improper.

In summary, from the point of view of engineering ethics, bribery is
the act of making payments, usually secretly, intended to induce the
recipient to act in a manner that is illegal or favorable to the
payer, at the expense of the recipient's employer, of the payer's
competitors, or of other parties, including the general public.




2. The "When in Rome" Argument
As mentioned above, there are parts of the world where bribery is a
common practice. Some argue that this should be considered as a
cultural difference that should be respected. Those doing business in
such places, goes this argument, should be expected to participate in
bribery as appropriate and not be handicapped by being held to ethical
standards that are not locally valid. Furthermore, engineers who are
nationals of countries in this category should not be expected to
adhere, while practicing in their own countries, to ethical practices
associated with a different culture.

This position is based on the assumption that ethics is relative to
location, and that it would be arrogant to rank the customs of one
area of the world over those of another. In effect, it equates ethics
with etiquette, or perhaps fashion. But, can the same act violate
basic ethical principles in one place and be consonant with them
somewhere else? Such values as respect for human life and welfare,
fair play, truth, and openness, which are the basis for ethics in
general and for engineering ethics in particular, are of fundamental
importance because they are critical to human society. To the extent
that they are violated, cooperation among people becomes increasingly
difficult, and human life itself becomes burdensome. This is true
universally. It is not a matter of cultural bias, and people
throughout the world tend to agree about the basics of ethics. (An
excellent discussion of the general issue of relativism in ethics can
be found in [Martin-Schinzinger, pp 252-256]).

With respect to the issue of bribery in particular, it is true that in
many countries it is quite widespread. But even in these countries it
is not considered to be a desirable practice, but rather a
problem. The fact that a harmful practice is prevalent does not mean
that it is acceptable or that efforts should not be made to eradicate
it. In all of these countries, there are people struggling to
accomplish this. Their efforts are impeded by the fact that the
principal bribers are often foreign companies competing against one
another for contracts.

It would be naive to believe that bribery and corruption are not
serious problems in advanced industrial countries such as the US.
Consider the massive corruption involved in military procurement in
the US where, for example, the Air Force paid thousands of dollars
each for Allen wrenches priced in hardware stores at less than a
dollar, and over $7000 each for coffee pots [Fitzgerald]. Perhaps
even more important is dependency of members of the US congress on
those able to make huge campaign contributions.

3. How Costly is Ethical Behavior?
Where giving bribes is a common practice in procuring contracts, a
company that does not offer bribes will clearly be at a disadvantage,
at least in the short term. It is likely to lose out to less
scrupulous competitors in the battle for contracts. Suppose that such
a company enunciates its policy clearly, and publicly calls attention
to the corrupt practices of its competitors. While this would
probably be counterproductive in the short run, the result may be to
build up good will among the forces in the country that are fighting
against corruption, Should those forces prevail, then the honest
company is likely to be rewarded. In the worst case, it may be
necessary to recognize that there are times when one must choose
between immediate self-interest and ethical behavior. Where
corruption is so rampant that it is not possible to do business in an
honest manner, then perhaps the most appropriate response is simply to
refrain from doing business in that country. If this policy were
widely adopted, then strong pressure for reform would be a likely
outcome.

The situation of individual engineers employed by companies doing
business in countries where bribery is rampant can be very difficult.
If their employers are among those engaged in corrupt practices, they
may be faced with agonizing dilemmas. Participating in acts of
bribery may be abhorrent to them on moral grounds and may expose them
to risks of legal prosecution and/or censure by their professional
societies. Refusing to participate may jeopardize their careers
within their companies. This is a situation where support from their
engineering societies could be of great value.

REFERENCES
Fitzgerald, A. Ernest, "The Pentagonists", Houghton Mifflin, 1989.

Martin, Mike W. and Roland Schinzinger, "Ethics in Engineering",
Second Edition, McGraw-Hill, 1989.
......................

How can an employee take an ethical stand regarding a business decision when his or her superior already has taken a different position?

What tends to happen in countries where organizations are highly socially responsible?

Is an employee's disclosure of illegal or unethical conduct by others within the organization?

Which of the following is a potential impact of bribery and other corrupt practices on business?