by Dr. T. William Hefferan

Influential global companies are finding themselves under the public’s ethics microscope to a greater degree than ever before. As this focus on how a company operates internationally emerged, firms like Nike discovered the financial risks that accompany failure to closely watch all their operations. Nike’s lessons came not from just how their firm operated directly, but how actions of others that were not under Nike’s direct control affected the public opinion of the company. Startling revelations like these ultimately affect the financial performance of the company.

This phenomenon is not solely associated with large influential companies in the contemporary global environment; it should be part of the operational considerations of any firm operating today. As firms move into the realm of global operations, the risk of ethical violations has many faces and many times is less than obvious necessitating forward-thinking and long-term strategies to help ensure a firm will not fall prey to ethics violations.

Nike may have been responsible for bringing the term “sweatshop” into the public eye of the global consumer. During this devastating scandal of 1996, Nike discovered the power of the consumer’s ethics microscope and their voice in the Global marketplace. In addition, the notion that a firm is not responsible for the human rights violations of the firms it deals with was clearly dispelled once the Nike example was presented in the court of public opinion.

Nike felt blindsided, but soon realized that a global firm has the responsibility to police its suppliers. Global organizations need to insist that all of its suppliers across the globe operate in accordance with the ethical standards of the parent company. The global consumer and the general public considers contract employees as “real” employees of the hiring company and is responsible for the fair treatment of every employee. If a firm fails to realize the implications of the Nike example, most assuredly at some point in the not too distant future, the negative financial aspects of unethical operations will strike an offending firm.

Wal-Mart is an example of a large influential firm that has come under fire for its alleged use of bribery in its massive expansion in Mexico. In its not too distant past, Wal-Mart was in the news for mistreatment of employees through its low cost approach to employee compensation. However, like many contemporary firms that find themselves under the consumer ethics microscope, Wal-Mart is proactively making a concerted effort to counter those opinions by strategically adopting positive endeavors as with the “going green” movement.

Through a policy of transparency, Wal-Mart has set benchmarks and other green goals that will serve as operational standards for global organizations to help curtail global warming. Firms like Wal-Mart can go further than just correcting ethics improprieties as they occur by imbedding fair dealing and positive operational changes that provide examples for other companies who can leverage the research that Wal-Mart has packaged for global consumption.

The establishment of regulatory devices, such as the Foreign Corrupt Practices Act cannot possibly regulate every facet of global ethics violations. We need to perhaps rely more on philosophies such as the simple concept of the Japanese, called kyosei: “living and working together for the common good.” The experiences of global organizations that have been ravaged by ethics scandals can provide examples of not only general and specific ethics pitfalls, but also reflect how these firms correct their misdeeds. They can set benchmarks for fair dealing and optimal ethics operations. The ethics evaluation process is not a static protocol, it has to be a process that continuously adapts and evolves to meet the complex revelation of events in the domestic and global environments.

Global organizations need to take the initiative and act proactively and search out potential problems and establish ethics guidelines for global operations that become a fabric of the company’s culture. The consideration of what costs more – reacting if and when a problem is brought to light or acting proactively – is no longer an issue. The cost of waiting for disaster can ruin a company if not disable it for years to come.

This places leaders of U.S. based global firms at a higher ethical operating plane. Every leader of any organization should adopt that higher perception of ethical value systems given the influence the public’s focus has on how these firms operate internationally and the economic risk that continues to grow if these firms fail to acknowledge this higher level of ethics. I do not buy the opinion of many who feel we somehow have permission to adopt certain local ethical values of host countries that are contrary to our own high ethical foundations.

Wal-Mart should have set an example and disdained engaging in the practice of bribery, in spite of higher costs. The ends do not justify the means. The United States needs to continue to be the global leader in setting an example of high ethical standards. It is a slippery slope that leads to ethical standards that would disgust those of us in the U.S.

Since the dawn of civilization, cultures have dealt with the issue of defining ethical behaviors for the people that comprise that culture. Ethics of a particular society can be described as the moral principles or values that govern a group of people. In the context of global business, this definition of what is the right way of doing business or the wrong way can be significantly different from country to country. In general, there might not be a single set of rules as to how to operate from a global perspective, but that a grey area between obvious right ways and wrong ways may exist. Each culture has areas of ethical behaviors that are widely expected and accepted, while others are considered inappropriate and unacceptable.

There are many internal and external environmental issues that affect this continuum of acceptable ethical behaviors in each country. Global competition can drive countries with unfavorable economic conditions to engage in bribery, and the influence of political corruption may also tend to promote bribery. A particular culture may not typically condone bribery. However, when high unemployment and other harsh economic conditions exist, the ethics of that culture may deteriorate.

Employees working in foreign cultures face a dilemma when dealing with cultures that are foreign to their own. We need to pay close attention to that grey area in my continuum example above. Companies can be either blindsided by an ethics violation like Nike was, or find themselves in trouble as a result of their sole focus on maximizing profit like Wal-Mart. By following the guidelines provided by the various legislative devices, U.S. based organizations can lead their contemporaries in the global environment to think in terms of universal ethics guidelines and move towards living and working together for the common good.

Leadership in the 21st century will have to move to a more responsible position to lead organizations towards social responsibility. Our contemporary leadership in the United States will play the pivotal role in leading by example how business should be conducted in the global marketplace. Leadership will engage the whole organization to embed ethical belief systems into the everyday lives of employees. The contemporary leader faces continuous change within the context of global ethics and risk, and the contemporary view — rather demands of the global public — require today’s leaders to act even more socially conscious than ever before. Global leadership today is operating in a fish bowl. The guiding influence of acceptable ethics in corporate global operations is the watchful eye of the U.S. consumer’s ethics microscope.

Copyright © 2012 by Dr. T. William Hefferan
All rights reserved, used by permission.

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