Business Ethics Project III

February 2020 / S T R A T E G I C F I N A N C E / 13

In international busi- ness, many companies operate according to the phrase “When in Rome, do as the Romans do,” which means that when operating in a host coun- try, you adopt that coun- try’s cultural norms, ethics, and business pro- cedures. To some degree, it makes sense to mold your company’s culture to best fit the local area. It’s important to understand cultural differences, but you should never compro- mise your company’s core ethical values.

For example, within the purview of lax or unethical leadership in countries or environments that lack robust legal or regulatory infrastructure and enforcement, bribery is more common—even to the point of being seen as normal or “the cost of doing business.” But that doesn’t make it acceptable for a corporation’s person- nel to take part in or go along with such a practice. The ethical tone at the top, the presence of profes- sionals with integrity, a strong corporate gover- nance system, and each government’s interest in the welfare of its citizens are factors that impact the business environment in which professionals must make ethical decisions. For values to be univer- sally applied, profession- als from different cultures must reach agreement on what constitutes an unethical action and how to handle ethical issues.

A CAUTIONARY TALE

Some multinational com- panies apply one set of val- ues and follow one set of rules in their home country

ETHICS

ETHICS MUST BE GLOBAL Companies that operate in multiple locations around the world need to embrace a single code of ethics and apply it everywhere. BY JOLENE A. LAMPTON, PH.D., CPA, CGMA, CFE, AND BABU I. RAZACK, CMA

 T HE MAXIM “Ethics must be global, not local” provides context for evaluating ethical issues that arise internation- ally. It also helps us to remember that values are the core component of a universal ethical framework. In short, business ethics should be steadfast and universal no matter where you

are in the world. Regardless of the corruption levels of the host countries in which a company is operating or where its home country ranks in Transparency International’s Corruption Perceptions Index, the company and its employees should act in an ethical manner. Therefore, if a company is international, then its code of ethics—as well as the IMA Statement of Ethical Professional Practice— applies to all locations where that company operates.

but disregard them or act differently when partner- ing with less stringent organizations or in host countries. Even multina- tional companies from countries that generally show good citizenship and ethical values in their home country frequently pursue high-profit and low-cost benefits in host countries through unethical practices such as using underage labor, offering low wages, polluting the local environ- ment, and permitting poor safety conditions.

Consider Union Carbide Corporation (UCC). In the 1980s, while ostensibly complying with American safety standards at its plants in the United States, UCC applied low safety standards in its plants in India and other developing countries. The company’s behavior showed that it valued maximizing profits over stakeholders’ inter- ests, disregarding the wel- fare of employees and the local communities in which it was operating.

UCC’s poor corporate governance and unethical behavior directly resulted in the Bhopal disaster in 1984, when an accident at a UCC pesticide plant in India exposed more than 600,000 people to at least 30 tons of highly poison- ous gases, causing at least 15,000 deaths. More than 25 years later, groundwa- ter found near the site of the plant was still toxic, poisoning local residents.

This supports the argu- ment that multinational corporations should follow the most stringent stan- dards worldwide regard- less of how strict or lax host countries’ ethical standards are. Multina- tional corporations should

uphold universal ethical standards and values globally, setting a high bar for safety requirements, environmental standards, and human rights wher- ever they operate. Such universal ethical values are fundamental ideals governing conduct that all cultures should aspire to.

MIND YOUR IMPACT

Multinational corporations should consider and respect all stakeholders’ interests while they pur- sue profitability, not just the financial gain of share- holders and C-suite exec- utives. Global ethics accompanied by good cor- porate social responsibility (CSR) and environmental sustainability practices ultimately benefit busi- ness entities’ reputation, long-term viability, and profits. Not only should professionals prioritize ethics above profitability to bolster trust and respect when forming new busi- ness relationships, but they should also operate ethically from a CSR standpoint to enhance global value chains.

Further, international business is characterized by a diversity of cultures, customs, and professional practices. When partici- pants in global business hold ethics in the highest regard, this promotes trust and better connections and interactions between dif- ferent cultures. When you visit another country, you may not know all of the business practices, cus- toms, or etiquette, but you can build a good reputation if you demonstrate a strong commitment to ethics.

In global business, ethics plays an important

role even when cultural differences come into play. In an ethical survey, we interviewed people from various sample groups with different cul- tures working in Kuwait about their views. Most respondents said that ethics is beyond local— rather, it’s global. While most accountants we sur- veyed agree that ethics is important, many said they need more support from their company’s top man- agement to navigate thorny ethical decisions.

Establishing a global code of ethics requires a comprehensive effort across the organization to continue to improve busi- ness practices and prevent or root out corruption. It doesn’t matter if you’re a model company in your home country if you act unethically elsewhere. An ethical organization must demonstrate ethical stan- dards and values when doing business in other countries. Lowering stan- dards just because “you can get away with it” or “that’s how business is done here” isn’t an accept- able excuse for acting unethically. SF

Jolene A. Lampton, Ph.D., CPA, CGMA, CFE, is an associate professor of management ac- counting at Park University and a member of IMA’s Austin Area Chapter and Committee on Ethics. She can be reached at [email protected].

Babu I. Razack, D.Litt., CMA, ACMA, is general manager of fi- nance at Ali Alghanim & Sons Group Gen. Trad. & Cont. Co. and mem- ber of IMA’s Kuwait Chapter and Committee on Ethics. He can be reached at baburazack @hotmail.com.

ETHICS

For clarification of how the IMA Statement of Ethical Professional Practice applies to your ethical dilemma, contact the IMA Ethics Helpline.

In the U.S. or Canada, dial (800) 245-1383. In other countries, dial the AT&T USA Direct Access Number from www.usa.att.com/traveler/ index.jsp, then the above number.

The IMA Helpline is designed to provide clarification of provisions in the IMA Statement of Ethical Professional Practice, which contains suggestions on how to resolve ethical conflicts. The helpline cannot be considered a hotline to report specific suspected ethical violations.

IMA ETHICS HELPLINE

14 / S T R A T E G I C F I N A N C E / February 2020

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