International Business Ethics

Business ethics refers to the regulations that govern the principles and moral obligations towards the people working in a business environment. It covers all the players individually and as teams. Therefore, business ethics cover individual employees within an organization as well as the whole organization. It is an old technique that tries to regulate the behavior of individuals as well as corporations within their respective industries as well as other players in the business environment.

Different countries and regions have different perceptions and practices with regard to business ethics. While some of the ethics are driven by the nature of business in question, most are influenced by the culture and people that the business is conducted in. Some people are more liberal and have been accorded more freedom than others and have different perceptions towards certain practices. Some cultural and social aspects that are related to the people within the region in perspective, such as religion and legal attributes, determine the overall ethical approaches that the business would embrace. Therefore, people from different backgrounds have different business ethics backgrounds. It is therefore important to determine the ethical regulations that one starts up a business in, if one starts a business away from the region they were brought up, or are familiar with. Some of the ethical issues are meant to motivate the employees to increase productivity, and may vary from one country to the other. That is, what could motivate people from one place might not work in another region. Due to the diversity in backgrounds between people in the world, there are no clear-cut ethical regulations that are acceptable in all regions in the world. (It should however be noted that some ethical practices are acceptable across all nations, regions and business environments).

As the process of globalization improves exponentially, there is need to determine the different ethical standards that exist in various regions. This is because investors need to know their markets before they set up their businesses. The workforce with the organizations is homogenous and the articulation of different cultures has become paramount for multinational corporations (Mahdavi, 2001). This paper will delve into the differences that exist between ethical issues within different countries in the world. It will take three cases from the United States, Asia (China) and Europe (Russia).

Forms of Differences in Business Ethics

a)      Collectivism and Individualism

The United States is placed on one end of the bipolar continuum that range from individualism to collectivism (Elenkov, 1997). While individualism is characterized by the different people working towards the achievement of their personal goals and aspirations, as well as those of their individual families, collectivism denotes the culture of many people coming together to achieve a common goal. The members of the group are responsible for the welfare and wellbeing of the other members, and interests of each member of the community in question are made known to every other member of the group. This would eventually lead to the benefits being spread across all people within the organization. In this case, the members are viewed as part of the larger group.

The aspects of collectivism are very vital in studying the differences between business ethical cultures in different regions (Bollinger, 1994). For instance, the United States is highly characterized with this kind of belief, where members are always self oriented. People always want to succeed on their own and are in most cases self reliant unlike in collective situations. They believe that identity of a person towards an organization is personal and the culture of oneness should not be encouraged. This is because there is a belief that societal norms should be upheld by all at an individual level, rather than as a group (Hofstede, 2001). This believe among Americans has developed over time (Puffer and McCarthy, 1995). It was steamed by the diverse communities that have settled in the country. These immigrants believed that success in the new country would only be obtained through individual efforts and not through teamwork. This belief has infiltrated thorough the young people who believe in themselves rather that\n the groups they are housed (Bollinger, 1994). A study by Hsu (2011) to determine the levels of individualism and collectivism in China and US showed that there was a significant difference between US and Chinese people in terms of collectivism and individualism. The study showed tthat there was a difference in age brackets among the Chinese population, where the older people were more collective than the people born after 1979 (Hsu, 2011). This could be attributed to the changes in the cultural beliefs and dynamics, which can change with time (Hofstede, 2001). In the United States, ethics are more self governed and self controlled, unlike the other countries where someone has to watch the rest of the people.

Another study by Irwin (2012), confirms that the Chinese culture and business ethics has a different approach to business culture. While the Russian and Americans other two can provide clear-cut definitions of using either collectivism or individualism, Irwin (2012) notes that the Chinese culture interact the two aspects. First, they follow Confucianism, which aims at developing people from individual level to social level (Irwin, 2012). This means that they start with individuals as they attempt to get to the whole organization. Confucianism is, on the other hand, divided into several aspects. Business ethics, within Confucianism is known as “Shang de”. It separates ones individual life and the work or business they do, since they believe that the two can create a conflict if they are used together. They believe that one’s personal life such as family eventually affect their work, hence they are carefully differentiated to ensure that they do not affect a person in a negative way. Shang de has two concepts, guanxi and mianzi (Irwin, 2012). The former refers to the individual relationships that one acquires at the places of work. It is however, not the simple aspect of knowing each other, but rather the development of understanding of one another at the place of work. Casual meeting and taking tea together, exchanging contacts are not considered Guanxi, but rather the relationship that is created with the basis of trust and mutual understanding. Further, this relation is formed between individuals and not at the organizational level. Mianzi on the other hand refers to the concept of different levels that people occupy in the society. For instance, a company director has more power than the juniors, thus his opinion is valued more than that of the junior employee (Irwin, 2012). Therefore, ethics in the Chinese culture are governed by the general environment, where the situation dictates the way that ought to be followed.

Russians have a different point of view. They believe in collectivism. The rewards are often offered at organizational levels rather than to individuals. In this case, employees are rewarded as per the performance of their organization, as they are related to their company (Elenkov, 1997). Studies have shown that this culture has been developed over decades, since the time when Russia was ruled by elites, and land was mainly owned by individuals and communist leaders. The subjects were therefore always kept at the check of their rulers and they never experienced individual freedom. They always believed in masses and looked themselves as part of the larger society. The Russian Orthodox Church as well as the rulers who dominated the history of Russia ensured that authority was dispensed from a central point and subjects never had any significant individual decision-making powers (Puffer and McCarthy, 1995). This assertion can be cemented by the fact that private businesses were only made legal in the 1980s in Russia (Bollinger, 1994). Ethics in this case are governed by the leaders and powerful people within the organization.

Power Distance

Power distance refers to the degree by which people within an organization can accept to have a wide gap from the top managers in the organization (Bollinger, 1994). While junior managers use their experience and discretion to make decisions within their discretions, senior managers are governed by the existing regulations and rules. When an organization has a long power distance, the decisions are made from one point and the rest are delegated, while a short power distance refers to a situation where the junior employees can easily reach their seniors. In the latter case, decisions are made after consultations where all people are involved and consulted regardless of their position.

Among the Americans, the ethical leadership and power distribution is given to the people, thus embrace a short power distance. The junior employees are allowed to make suggestions and in some cases, implement them, especially during emergencies. In some cases, senior managers create forums of interaction for all people where they share ideas and seek for solutions for hard tasks. These forums bring together experienced employees and the new in the job, where they interact and provide a better working environment. In most American organizations, departmental meetings where new ideas are discussed as well as improving on the existing ones. This has been attributed by the belief that everyone is responsible and can have something new for the organization regardless of their positions or levels of qualification (Elenkov, 1997).

On the other hand, Russians embrace a high power distance (Bollinger, 1994). This has been closely attributed to the culture where they are used to leaders who make decisions for them throughout their history. Puffer and McCarthy (1995) also attributed this culture to the roles played by the church. People were not allowed to question decisions since the people who made them were senior and superior. The top managers in this system were very powerful and made all decisions regarding an organization. Their perception should be regarded as a very important aspect because they believe that it would never affect their behavior (Elenkov, 1997).

The Chinese also tend to follow a similar system as the one followed by the Russians, where there is a high power distance (Irwin, 2012). However, their ethical culture demands that the junior manager cannot make suggestions to a senior manager. According to Mianzi, a Confucius concept, respect for the people in authority is very vital. Disagreements between colleagues and people in authority are therefore avoided at all costs. Junior employees avoid making suggestions for their seniors because they believe that they could make their seniors ‘lose face’ if they made their suggestions. However, managers are trying to bridge this with time, as they solicit for suggestions in a different way from what would sound like a confrontation. He employees are however cautious and sensitive as they give their opinions in the fear of being seen as unintelligent. In the long run, viable suggestions are not utilized (Irwin, 2012).

b)      Uncertainty Avoidance

This refers to the level at which a society can accept uncertainty or ambiguity. While all societies acknowledge good results, many of them do not seek for accountability for the path that the good results were obtained. However, some societies do not only acknowledge the results, but also seek to determine the clarity of the path of acquisition. This is regulated through laws and regulations.

The US are a utilitarian society (Reidenbach & Robin, 1990). An achievement for a society is considered better than that of an individual. However, the country has very strict rules and regulations that govern the processes through which business transactions and property acquisitions are made. Though the person with the most achievements is treated as the bigger achiever, the means through which the property was achieved is strictly scrutinized. In this case, any form of businesses must follow certain legally ethical guidelines in order to succeed and be termed as successful (Reidenbach & Robin, 1990). There are very comprehensive code of laws that not only defines opportunity, but also seeks accountability in the exploitation of the opportunities at the disposal of the people. This code also regulates the manner in which business is transacted in the country thus ensuring no loose ends and inambiguity in the business environment. Their uncertainty avoidance is therefore very credible.

The Russian society is also utilitarian. However, unlike the United States where accountability of the means through which business or transactions were made, they appreciate the results. Since the leaders are the most significant people in the business environment, they are rarely put at fault as their decisions are applauded by all. The transition towards socialism is unclear because private investors are allowed to conduct business but old structures that encouraged socialism are still in place. These are very significant barriers to conducting business by private investors, who would like to have a better way of governing their business, checking their achievements autonomously (Reidenbach & Robin, 1990). The country therefore has a very poor avoidance index since the process through which business is conducted does not matter at all.

China, like Russia, has a very poor uncertainty avoidance index (Irwin, 2012). This means that they do not mind the means through which success was achieved. In this case, there are many ambiguities in the performances of different organs. Such include the language, which could be used as a good pointer in their position in this aspect. Their acceptance for language ambiguity is highly accepted among them and is indeed preferred in some cases. This is reflected in the corporate world as well since there are many cases where the laws and regulations are treated as secondary considerations (Irwin, 2012). They allow for flexibility in their deeds to fit the specific situations and not the legal implications that go along with the process. This is in most cases reported in the process of acquisition of acquisition of contracts, which has been termed as imprecise. The emphasis is laid on the means on how to keep the relationship between the two corporate organizations that do business with each other (Irwin, 2012).

Points of Interaction between the Three Cultures

With globalization increasing in speed of spread and adoption, there is need to come up with a concrete balance between local ethics and international perceptions. American’s individualism has helped them come up with good results since one is self-driven. Over the recent years, the Chinese have become a big economy and studies have shown that people born after 1979 are more individualistic than those born before then. This coincidentally comes at a time when the Chinese economy is getting better and bigger. Russia should join the rest of the economies in individualism and give freedom to private investors. Today, they have allowed private investors to start and manage their businesses but they have kept the old and ancient ways of business ethics. All the three economies should follow individual approaches.

Secondly, increased power distance leads to important suggestions being locked out. The American style of close interaction between leaders and employees should be upheld and used more to ensure that there is harmony and good work relations that would eventually lead to high returns and exploitation of everyone’s potential in terms of actual work and ideas. Finally, accountability is important to any business as it depicts its general environment. The old belief that “the end justifies the means” should not be used any longer especially in China who have been dubbed unethical in business and have attracted other criticisms such as allegations of currency manipulation. They should eliminate such doubts in future so that they can be termed as a big economy in the world without controversies.

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