“Ethics goes beyond what the law requires. It involves doing the right thing and following both the spirit and not just the letter of the law.”
Carol Tate, Chief Compliance Officer, Intel Corp
Most successful businesses come with a clear vision, mission, objectives and operational strategy. But when organizations start to expand and operate in newer geographies, global business ethics and laws need to be carefully considered to ensure success.
Sometimes, global circumstances too can catalyze enforced transitions. The last two years have given more than a glimpse into the abilities of businesses of various sizes to reshape amidst lockdowns, recessions, and other forms of social restrictions.
Businesses can no longer survive in isolation. The global economy and the thousands of enterprises in it are all interconnected like never before. In such a close-knit yet fragile environment, the need for international business ethics can not be overstated.
Some of the most common issues related to international business ethics concern the areas of recruiting in new countries, outsourcing, compliance to local laws and regulations, managing a multicultural workforce, running global payroll operations and many more. Let us take a few minutes to examine the various aspects involved and the importance of ethics in international business.
Importance of Ethics In International Business
Just like any society needs order and harmony to function and thrive, the business ecosystem requires a moral compass and ethical foundations. Some of them are set in stone and have become part of the law or regulatory compliance. These can be in the form of worker’s safety, minimum wages guaranteed, abolition of child labor, environmental protection guidelines, and many other forms. These are clear-cut, almost binary in nature, and have tangible consequences in the case of non-compliance.
Furthermore, several other values and behaviorisms form a part of the professional code of conduct and ethics in international business. These act as the guiding light in directing management as well as the staff towards responsible governance, self conduct, and execution of business duties.
Non compliance can result in tangible consequences such as fines, financial penalties and even litigation in extreme cases. Non tangible impact can mean reduced brand value, distrust among customers and reputational damage.
Remember Zoom? In the initial stages of Covid related work from home, Zoom had become the go-to video conferencing tool for a large population across the world. But then issues unraveled regarding security and data privacy of its users leading to a massive backlash from the user community, including sanctions in some of its operating countries.
International Business Laws And Regulations
When ethics and morality in international business are coded into the law of the land, it becomes easy to define, implement, and monitor businesses. Defaulters can easily be tracked and reprimanded (if needed) accordingly.
Let us take the example of the International Labor Organization (ILO), one of the most well-known guardians of global business ethics and moral code. The principles of the International Labor Law are well established and administered across different countries and cultures, uniformly.
After all, law loses all its meaning if it is disparate for different sections of people across geographies.
The ILO and other regulators of global business ethics have a clearly laid out set of rules and directives. While one set of guidelines revolves around the public international code of conduct among the different participating nations, the other deals with the moral behavior between enterprises and the individuals within a specific geographical area. This works well, as it provides a homogeneous direction for acceptance of international business ethics while also being mindful of cultural nuances and uniqueness. The efficacy of this system is evidenced by the fact that 187 countries of the world are members of the ILO and acknowledge the value and role of ethics in international business.
The principles of international business ethics that have become universally accepted laws (at least in the countries that abide by ILO rulings) include (among others):
- Concept of minimum wage
- Employee health safety
- Sensitivity towards hazardous working environment
- Fair employee termination policy
- Transparent payroll system
Ethics Best Practices For International Business
While the aforementioned are laws set in stone, it can not and does not cover all aspects of unethical practices in international business. A lot of the onus also lies on the local businesses and the organization’s own culture and philosophy. While a uniform code of conduct is the ideal situation, it may not be achievable due to varying business ethics and its definitions across countries and, at times, even industry.
Yet, experts believe the role of ethics in international business can transcend geographies and industries, since most ethical best practices have similar underlying principles. For example, the following are all aimed at the betterment of society, the environment, and the workforce:
- Cognizance of local customs and laws
- Appreciation of cultures
- Recognition of individuality
- Unerring integrity in business transactions
- Fair trade practices
- Wage parity
- Environmentally conscious processes
- Honest and transparent communication
- Zero tolerance of discrimination of any sorts
This is especially relevant for businesses with presence in multiple geographies. Each country has its own statutes and laws to be adhered to. For example: Hiring resources in the UAE or drafting an employment contract is drastically different than in India. Similarly, the regulations regarding employee benefits, payroll processing management, and compliance management; all come with their own set of unique requirements. Tackling them all on your own can be a daunting task. It will require you to set up a dedicated team for compliance to local mandates. This is both expensive and can easily take away time and attention from your core business.
International Communication And Cultural Barriers In Business
Communication and cultural barriers are something most commonly observed in large multinational conglomerates or businesses engaged in dealing with overseas partners and clients. With the massive globalization and present prevalence of remote working, these barriers may have become more pronounced than ever before. Imagine a person sitting in Japan hiring people in the Middle East. The prevalent remote team hiring challenges and other impediments may stem from a variety of differences, such as:
- Societal values
The way business is conducted in the USA is drastically different than in India. Yet these two countries have billions of dollars worth of trade each year. US commercial giants like IBM, Accenture, Amazon, Dell and many others employ tens of thousands of Indians as part of their own organization or through outsourced projects. How is this being achieved?
One of the best practices in international business ethics that these companies have adopted successfully is training their workforce in appreciating the uniqueness of different people and developing a uniform organizational culture that is built upon mutual respect and trust. It does not happen overnight. There are several communication and training programs that are run on a regular basis to increase the sensitivity quotient of the employees. Many would agree that this is best achieved when it is a top down approach percolated from the higher echelons of management down to the grassroot employees.
Global telecom gear giants like Ericsson and Nokia have similar training sessions for even their partners and vendors (not just full-time employees), since all of this combines together to make the business ecosystem of any company. The HR challenges in international business, too, are taking new shapes and forms.
The common thread you will notice is that all of these, and many more such, companies are decades old and have been able to thrive in a multicultural environment by effectively breaking communication barriers. Does it mean there are no conflicts in these organizations at all?
Surely, there is no business utopia that exists and conflicts are a part of daily life. However, successful organizations encourage healthy ways of dealing with conflict with open communication, respect, and patience. They recognize the potential that disagreements can lead to innovative and disruptive business ideas, as long as they are nurtured properly.
How Can Multiplier Help Enforce International Business Ethics
The need for a strong code of conduct that guides the management and employees alike has never been more relevant than today. With a large percentage of business being run remotely lately, cultural nuances and communication barriers are more obvious. Moreover building remote teams is not an easy task. Employers also run the risk compliance, against which employers must have a documented strategy in place to guide international business ethics strategies and responsibilities .
Several organizations, across various domains, have turned to Multiplier to manage global compliance and payroll functions. We offer an all-in-one international employment platform that is able to seamlessly manage your talent pool from hire to retire. From recruiting and onboarding employees across geographies to managing their payroll, benefits and other HRM functions, Multiplier is able to do all this and much more while ensuring 100% compliance with local and international laws that govern your business.