International Business Ethics: Balancing Local and Global Standards

Introduction

A classical dilemma that is associated with international business ethics is the tension between standards of behaviour that companies are used to in their main country of operations, and the different standards that exist in the foreign countries that host their overseas operations (Singer, 2002). In view of the relativism of cultures across the world, managers find that they are confronted with the difficulty of determining what to do when faced with business practices that may ordinarily be deemed unethical in their home countries. In this regard, it is suggested that managers may either choose what Donaldson (1996) refers to as the “when in Rome” approach [to do in Rome as the Romans do] by adapting to the ethical standards that prevail in a given country, or adopt an ‘absolutist’ approach that emphasizes same ethical standards at home and abroad. In choosing the approach to use in international business operations, managers must contend with the need to ensure some level of integrity in their business activities despite the often blurred and inconsistent standards of business ethics obtainable or permissible from country to country (De George, 1993).

In view of the foregoing, Thomas Donaldson addresses the complex matter of corporate values and business ethics on a cross country basis and establishes that although values and business ethics vary across countries, it is necessary for companies to firmly establish the ethical values that they uphold, and for such values to be replicated both home and abroad – in spite of the tensions between extant values in a cross-cultural context. Indeed Donaldson cites a number of examples of companies that successfully upheld absolute ethical standards for their operations both at home and abroad. The example of Levi Strauss’s operations in Bangladesh is particularly relevant for the critical discussion of Donaldson’s perspectives as undertaken in this paper.

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It is however important to begin by pointing out that Donaldson acknowledges that a company’s ethical policy may standard and effortlessly implemented at home, it could be problematic and unsuccessful abroad. This is due to the absence of clear-cut international standards of ethical business behaviour, and also due to the prevailing realities of different countries. It is for this reason that Donaldson rightly points out that business practices (especially in an international, cross-cultural context) exist in a ‘moral-free space’; a gray zone that is neither black or white, and one that managers need to apply discretion in dealing with. Indeed, the dilemma or tension that may characterize companies’ values and ethics in international business settings is very clearly highlighted by one example cited by Donaldson pertaining to the lawful execution of a local employee of a US firm in China after he was caught stealing and subsequently reported to the authorities by his manager. Although the action of the manager (in reporting a case of theft to the authorities) was in line with the instituted values and standards that the company upholds in its US operations, the subsequent execution of the culprit in line with extant Chinese legal standards is clearly at variance with the punishment that would have been meted out to the culprit for the same offense in the United States. In view of the foregoing example, the need for a balancing act of sorts has been clearly recognized by Donaldson as being required to define the ethics of a company in cross-cultural business contexts.

It is for this reason that Donaldson contends that companies ought to be guided by three key principles in determining their ethical behaviour  respect for core human values (which, according to Donaldson, is the basis for an absolute moral threshold for business activities),  respect for local traditions, and the belief that context matters when deciding what is right and wrong. These principles help in establishing a moral guide for business practice. Donaldson (1996) therefore argues that these principles altogether provide a sort of moral guide for business practice irrespective of location or culture. The problem with Donaldson’s perspective, however, is that it does not adequately take the challenge of cultural relativism (see Rachels, 1986) into consideration in espousing the absolute approach to business morality, values and ethics. This therefore presents the inevitable question: is it more effective for companies to adopt an absolute approach as opposed to a relativist approachThe answer to this question may be sought in examining the case of Levi Strauss in Bangladesh.

Levi Strauss is put forward by Donaldson as an outstanding example that companies can indeed find ways to implement absolute ethical standards that encompass the three principles of ethical behaviour earlier mentioned. Donaldson uses the company as an example of how cross-cultural ethical tensions can be creatively and responsibly resolved in a way that does not compromise the standard forms of ethical behaviour that a company should uphold. According to the account, Levi Strauss reportedly discovered that two of its local suppliers in Bangladesh engaged in the practice of hiring children below the age of 14. Although this practice was strictly forbidden by the company’s ethical codes and corporate values, it was generally accepted and permitted in Bangladesh society as a practical counter-measure to lack of education opportunities and hardships for the children and their families who greatly depended on the earned wages. Realizing that compelling its suppliers to relieve the children of their duties would mean that they would not receive education, Levi Strauss devised a creative arrangement in which the company and its suppliers reached an agreement in which the suppliers would pay the Children’s normal wages (while they went to school), and offer the children jobs when they each attained the age of 14. On the other hand, Levi Strauss agreed to undertake the responsibility of paying tuition fees and providing school uniforms and books for the children – an arrangement that made it possible for the company to uphold its standard principles and ethical values while also rendering corporate social responsibility efforts that benefits the host country on a long term basis (Levi Strauss, ND). It has been suggested that the focused commitment of Levi Strauss to this sort of absolute approach towards upholding its ethical values in spite of extant local standards is required in order for managers to have a foundation that guides ethical behaviour (see Mohamad, 2010, p.153).

In appraising the arrangement put in place by Levi Strauss to balance the need to prevent the use of underage workers and the need to ensure that such children are not deprived of education and livelihoods as a consequence, it is clear that there is a sort of moral compass for business practice – established by the core values of the company. As argued by Donaldson (1996), these core values (such as that demonstrated by Levi Strauss in Bangladesh) help businesses to identify those practices that are acceptable as well as those that are unacceptable in their estimation – irrespective of whether such practices are permissible and widespread within the context of the host country’s value systems and norms. Accordingly, Levi Strauss considered it unacceptable that – on the one hand, employing children precludes them from opportunities of basic education while on the other hand releasing such children from employment without alternative arrangements would render them too poor to feed or pay for education.

Indeed, Donaldson also notes that the boundaries of ethical behaviour and ethical responsibility do not only lie within the purview of a company alone; the actions of a company’s supplier or customer may sometimes also pose ethical problems that invariably affects the company itself. The way a company chooses to handle the ethical problems brought about by the actions of its suppliers and customers is therefore a reflection of its approach to the issue of standards of ethical values – absolutist or relativist. In another example of Levi Strauss’s absolutist approach to upholding its ethical values, Donaldson cites the case of the Tan Family who were among the largest suppliers for Levi Strauss, and who were reportedly engaged in the practice of forcing about 1200 female Chinese and Filipino labourers to work up to 74 hours a week under difficult conditions in guarded compounds. Given that this practice was completely antithetical to the upheld corporate ethical values of Levi Strauss, the company chose to break off business relations with the Tan family after repeated warnings failed to dissuade them from the practice.

Although the tough stance of Levi Strauss in preserving its standard business ethics across its operational locations may be considered worthwhile from a moral point of view, the subjectivity of morality, or indeed the existence of what Donaldson calls the “moral free space” raises questions as to the degree of imperativeness that should be attached to such absolutist standards upheld by the Levi Strauss. Given that this ‘gray zone’ of morality does not recognize clearly defined benchmarks or prescriptions of ideal ethical behaviour of companies, it is also difficult, in theory, to fault companies that refuse to toe the same line as Levi Strauss in similar contexts. Indeed, certain inconsistencies may be identified in the contention of Donaldson pertaining to his espousal of the sort of absolutist approach to business ethics adopted by Levi Strauss. While he strongly believes that “respect for core human values” is the basis for, and determinant of an absolute moral threshold for business activities regardless of location, he fails to convincingly define such a threshold – a failure that clearly stems from his acknowledgement that there is indeed a “moral ambiguity”, and that what is considered ethical in one country may be considered unethical in another. In all, Donaldson recognize that irrespective of the core values or ethical corporate culture that has been established by a company, the responsibility for implementing the general ethical values of the company rests with the managers who must grapple with the values in tension by exercising good moral judgment that does not negate the “core human values”. The ambiguity of these core human values is what is not sufficiently emphasized by Donaldson.

For instance, the decision of Levi Strauss to enter into a creative arrangement with its suppliers to discourage the use of under aged children as labourers and ensure their attendance of school may not be adopted by another company in a similar situation for a number of reasons. Unlike Levi Strauss, such a company may deem it impracticable to pay tuition fees and provide education materials for children employed by its suppliers if they determine that doing so may significantly affect their finances, or destabilize their business relationships/contracts with suppliers. At best, such a company might be satisfied that they do not directly employ children that are under the age of 14, and therefore do not bear ethical responsibilities over the decision of their relatively independent suppliers to do such – especially given that such practices are essentially acceptable and widespread in the context of the Bangladeshi business environment. Yet, it may be rather subjective to conclusively declare that a company that takes this position would be acting in an unethical manner. This is particularly in view of the fact that the suppliers had argued quite correctly that, in Bangladesh, the use of children less than 14 years of age as workers was “normal and acceptable practice” (see Balaguer, 2003, p. 113), and that in fact, dismissing the children would cause them and their families to experience severe hardship. Another foreign company in Levi Strauss’s position may therefore deem this situation to be too intricate to dabble into – preferring to ‘act as Romans while in Rome’ and leave such matters to the local suppliers to handle how they deem fit within the extant normative or ethical standards. In so doing, they essentially recognize the inevitable cultural differences between their home country and the host country, and simply accept the prevailing situation (see Donaldson and Dunfee, 1999, p. 46).

Alternatively, certain other companies in similar situations as Levi Strauss may choose to simply instruct their suppliers to disengage the child labourers – without bearing any responsibility for the aftermath of such disengagement which would most likely further impoverish the children and their families while not making it easier for them to attend school. In this case, the ambiguous boundaries or gray zone of ethical behaviour would make it well within the rights of such manager to argue that they have behaved ethically and in line with their corporate principles of not only forbidding the direct employment of child labourers, but also rejecting the use of child labourers by their suppliers. These contextual ambiguities effectively demonstrate the difficulty in arguing a favour of a given ethical position adopted by companies that are confronted with the dilemma of choosing between absolutist and relativist approaches to business ethics.

On another level, the decision of Levi Strauss to discontinue business relations with the Tan family due to the supplier’s severe working conditions for its female Chinese and Filipino employees can be attributed largely to Levi Strauss’s reliance on a written code of conduct – the Global Sourcing and Operating Guidelines or Business Partner Terms of Engagement – which clearly states that the company will “seek to identify and utilize business partners who aspire as individuals and in the conduct of all their businesses to a set of ethical standards not incompatible with our own” (Donaldson, 1996). Given that Levi Strauss’s operating guidelines encourage them to actively seek partners whose ethical values are consistent with theirs, it is difficult to establish the extent to which other companies can implement similar guidelines and find partners in countries where completely different ethical standards are firmly entrenched. Also, such operating guidelines do not always so clearly spell out rigid terms of engagement in view of the need to incorporate cultural relativism in the overseas operations of a company. As such, irrespective of the broad ethical positions espoused in such guidelines, the imperative of successful business operation and profitability might make it necessary for many companies to grant considerable latitude to managers to implement the ethical standards considered most appropriate in the context of a particular operating environment. Accordingly, the gray zone associated with cross-cultural ethical ambiguities makes it quite problematic to conclusively determine that the approach adopted by Levi Strauss is the most ethical position, and that other companies who preferred other approaches in similar circumstances were less ethical in their behaviour.

Conclusion

Overall, the conclusion of Donaldson to the effect that it is possible to create a global ethical perspective businesses and managers is quite plausible. Although, in theory, one may reasonably acknowledge the inevitable relativism of cultures and the attendant relativism of ethical standards, it must also be acknowledged that in practice it is not ideal for companies to overlook clearly discriminatory, harmful and unfair practices in their host countries even where such practices are permitted. Accordingly, Donaldson’s absolutist guidelines that support the entrenchment of common standards of ethical behaviour may be deemed appropriate. As demonstrated by Levi Strauss in its dealings with its suppliers in Bangladesh, it may be possible to successfully circumvent the difficulty posed by culture relativity by not only designing and implementing clear-cut conditions of engagement for suppliers (and customers where applicable), but also importantly through the exercise of moral imagination and creativity.

References

1. Balaguer, A. (2003) Child Labour Resource Guide, Appendix 6 – Developing child labour policies: examples from four major businesses, UNICEF [online], Available: http://www.unicef.se/assets/child-labour-resource-guide-appendix-6_e4fec6c.pdf [Accessed 1 June 2011]
2. De George, R.T. (1993) Competing with Integrity in International Business, Oxford: Oxford University Press.
3. Donaldson, T. (1996) “Values in Tension: Ethics away from Home”, Harvard Business Review, 74(5): 48-62
4. Donaldson, T. and Dunfee, T. W. (1999) “When Ethics Travel: The Promise and Peril of Global Business Ethics”, California Management Review, 41(4), 45-63.
5. Levi Strauss (ND) “Case Study: Child Labour in Bangladesh“, Levi Strauss & Co [online], Available at: http://www.levistrauss.com/sites/default/files/librarydocument/2010/4/Case_Study_Child_Labor_Bangladesh.pdf [Accessed 01 June 2011]
6. Mohamad, S. (2010) “Ethical Corporate Culture and Guidelines for Ethical Leadership”, International Journal of Trade, Economics and Finance, 1(2), 151-154.
7. Rachels, J. (1986) The Challenge of Cultural Relativism, New York: Sage Publications.
8. Singer, P. (2002) One World: The Ethics of Globalization, New Haven, CT: Yale University Press.

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