Reflection and Discussion Forum Week 3

Chapter 7. Ethical Issues in the Global Arena

Introduction

The growth of global business as a critical element in the world economy is one of the most important developments of the past half century, but it also has been an increasingly fertile ground for corruption and ethical challenges. Epstein and Hanson refer to the global level as potentially part of the “Bad Orchard” level. At this competitive, global level, ethical behavior is much more challenging and misconduct is more likely. In the United States and elsewhere, domestic issues have been made immensely more complex by the escalating international growth of commerce. At the same time, the internationalization of business has created unique challenges of its own. With the rise of global business, international markets have been seen as natural extensions of an ever-expanding global marketplace that must be pursued if firms are to remain competitive.

This expanded global marketplace has been referred to also as the transnational economy. A useful definition of the transnational or global economy is as follows: trade in goods, a much smaller trade in services, the international movement of labor, and international flows of capital and information.

Most observers have assumed that international business would continue its rapid growth of the past two decades and that, increasingly, companies and countries would become more integrated with the rest of the world. Global trade statistics, however, suggest that after a burst of globalization about a decade ago, world business has been more in a period of consolidation, possibly even retrenchment. Beginning with the global financial crisis of 2009, growth in international trade has become sluggish. With the global pandemic serving as a significant overlay beginning in 2020, the challenges have been even greater. French President Emmanuel Macron has said that the coronavirus “will change the nature of globalization, with which we have lived for 40 years.”

This is why some business experts have begun to think that the globalization moment is over. Why, for example, would one want to offshore jobs to China when Chinese workers are demanding and getting large pay raises? Why would a company want to expand its supply chain when it might be interrupted by terrorists? These and other important questions are being asked.

Not only has world economic growth slowed, but global instability in the form of geopolitics has become more intense than in any recent period. Geopolitical issues that have now intertwined governments with business include global migration patterns, tariffs, trade wars, terrorism, and corruption. In spite of this, the most recent survey of CEOs says that they expect global economic growth to improve beginning in 2021. McKinsey & Company has observed that “the resilience that businesses have developed in the face of disruption (the pandemic) can provide a new foundation for growth.”

Some companies are beginning to question the breadth of their operations and are worried about their vulnerability to regional instabilities. Not only has business growth slowed in the global economy, but it has also been getting more complex and subject to increasing disruptive changes. Researchers at the McKinsey Global Institute have observed that there are four trends or forces that are transforming the nature of the global economy and, hence, global business: the rise of emerging markets, the accelerating rate of technological change on market competition, an aging world population, and greater connectedness in movements of trade, capital, people, and data. These trends have been ushering in a dynamic, new phase of globalization.

The complexity and intricacies of the transnational economy and the globalization of business are seen visibly when social or ethical issues arise. At best, business ethics is difficult when we are dealing with one culture. Once two or more cultures intersect, along with the rapid changes in each of them, it gets extremely complex. Managers must deal not only with differing customs, protocols, and ways of operating but also with differing concepts of law and standards of acceptable business practices. All of this is then exacerbated by the fact that world political issues become intertwined. What might be intended as an isolated corporate attempt to bribe a foreign government official, in keeping with local custom, could readily explode into major international political tensions between two or more countries.

7.1. Challenges in the Global Environment

There are five major challenges that virtually all businesses face in doing business internationally. These include language barriers, cultural differences, managing global teams, currency exchange and inflation rates, and nuances of foreign politics, policy, and relations. Underlying these challenges as they operate in a multinational, business environment, companies also have to deal with several complex issues. One is that of achieving corporate legitimacy as the multinational corporation (MNC), or multinational enterprise (MNE), seeks to be recognized and accepted in an unfamiliar society. A second and related problem is the fundamentally differing philosophies that may exist between the firm’s home country and the host country in which it seeks to operate. For firms to be perceived as legitimate in the eyes of a host country, they must fulfill their social responsibilities and be good corporate citizens abroad just as they were expected to do so at home. Sometimes being socially responsible has different meanings in different countries.

Closely related to the legitimacy issue is the dilemma of MNCs that have quite different cultural or philosophical perspectives from those of their host countries. The philosophy of Western industrialized nations, and thus their MNCs, has focused on economic growth, efficiency, specialization, free trade, and comparative advantage. By contrast, many developing countries or emerging economies have different priorities. Other important objectives for them might include a more equitable income distribution or increased economic self-determination. In this context, the economically advanced nations may appear to be inherently exploitative in that their presence may perpetuate the dependency of the poorer nation. Very large MNCs have budgets that exceed those of many small countries. Thus, critics of MNCs say they have too much power and undue political influence over governments and can exploit developing nations. These basic challenges set the stage for examining how ethical problems arise in the global environment.

An important topic that has come up in recent years has to do with the diverse views about corporate social responsibility (CSR) relative to business–government relationships that occur in different regions of the world. For example, Scherer and Palazzo have noted that under conditions of globalization, the strict division of responsibilities between private businesses and nation-state governments do not hold as much everywhere. They observe that many business firms have begun to assume social and political responsibilities that extend beyond legal requirements and fill some vacuums in global governance. Thus, there is an emerging, politicized concept of CSR that is occurring in some parts of the world. We discussed this notion of political CSR in Chapter 2, and we continue the conversation in Chapter 18 when we discuss business’s influence on government. Though this changing relationship between business and government is not occurring everywhere, it is a factor that needs to be considered in some regions of the world. It is in the global business environment where it has become most applicable.

Social, cultural, and ethical tensions are built into global business. MNCs attempt to bridge the cultural gaps between two or more cultures; yet, as they attempt to adapt to local customs and business practices, they are assailed at home for not adhering to the standards, practices, laws, or ethics of their home country.

Figure 7-1 graphically depicts the dilemma of MNCs caught between the characteristics and expectations of their home country and those of one or more host countries. They often find themselves in an almost unmanageable situation but cannot be deterred from finding sustainable solutions if they desire to expand to markets abroad.

Figure 7-1 The Dilemma of the Multinational Corporation

Details

Spotlight on Sustainability A Global Sustainability Movement: Earth Hour

The celebration known as Earth Hour was started in Australia in 2007 by the World Wide Fund for Nature (WWF). The organization’s mission is to stop degrading Earth’s natural environment and to create a low-carbon future for planet Earth.

Earth Hour is a global sustainability movement that was initiated with the hope that each year will bring about a continued celebration. The first Earth Hour was held in Australia, and after national acclaim, it gained high international interest, with more and more cities beginning to sign up for the next Earth Hour campaign.

Held each year on the last Saturday of March, Earth Hour engages millions of concerned citizens in 180 countries and territories to turn off their lights and show support for the planet. Beyond the switching-off event, Earth Hour has become a catalyst for positive sustainability impact. You can learn more about Earth Hour’s mission and events in your country by going to https://www.earthhour.org/take-part/events.

Sources: Earth Hour, https://www.earthhour.org/our-mission, accessed March 26, 2021; “Earth Hour 2021,” https://www.worldwildlife.org/pages/earth-hour, accessed March 26, 2021; Earth Hour, Facebook, @earthhour, https://www.facebook.com/earthhour/, accessed March 26, 2021.

7.2. Ethical Issues in the Global Business Environment

The challenges for companies operating in the global business environment include issues of corporate social responsibility, generally, and business ethics, specifically. Our primary focus in this chapter will be on business ethics, but the issues related to the global dimension of CSR should not be forgotten. For many companies, most of the ethical problems that arise in the global environment are in the same categories as those that arise in their domestic environments. These ethical issues reside in all of the functional areas of business: operations, marketing, finance, accounting, and management. These issues embrace the fair treatment of stakeholders—employees, customers, the community, and competitors—and involve product safety, plant safety, advertising practices, human resource management, human rights, environmental problems, business practices, and so on.

These ethical issues may seem to be somewhat fewer in developed countries, but they exist there as well. The ethical challenges seem to be more acute in less-developed countries (LDCs) or emerging economies because these countries are at earlier stages of economic development and often do not have a legal or ethical infrastructure in place to help protect their citizenry. This situation creates an environment in which there is temptation to operate with lower standards, or perhaps no standards, because fewer government regulations or activist groups exist to protect the stakeholders’ interests. In the LDCs, the opportunities for business exploitation and the engagement in questionable practices (by developed countries’ standards) are abundant.

7.3. Improving Global Business Ethics

It is clear from the discussion up to this point that business ethics is much more complex at the global level than at the domestic level. The complexity arises from the fact that a wide variety of value systems, stakeholders, cultures, forms of government, socioeconomic conditions, and standards of ethical behavior exist throughout the world. Recognition of diverse standards of ethical behavior is important, but if we assume that firms from developed countries should operate in closer accordance with developed countries’ ethical standards than with those of developing countries, the strategy of ethical leadership in the world will indeed be a challenging one.

Because the United States and European multinationals have played such a leadership role in world affairs—usually espousing fairness and human rights—these firms have a heavy responsibility, particularly in underdeveloped countries and developing nations. The power–responsibility equation and the Iron Law of Responsibility (see Chapter 1) suggest that these firms have a serious ethical responsibility in global markets. That is, the larger sense of ethical behavior and social responsibility derives from the enormous amount of power these countries have.

In the following section, we will first discuss the challenge of honoring and balancing the ethical traditions of a business’s home country with those of its host country. Next, we will discuss four recommended strategies for conducting business in foreign environments. We will conclude by taking a look at some other steps companies are taking to improve their global ethics.

Chapter 8. Business Ethics and Technology: The Digital Enterprise

Introduction

We live in an age dominated and driven by rapidly advancing technology. As Nancy Gibbs, editor of Time magazine, observed, “technology … accelerates and complicates.” In fact, technological change is significantly outpacing generational time spans. The world can look different in the span of a few years, as businesses have come to realize. At one time it was common for chief financial officers to be strongly positioned to become CEOs. Today, it is the chief technology officer (CTO) of major firms. We are now in the digital era, the era of the digital enterprise, and strong technology leadership has become the key to business success.

The latest working generation, called the iGeneration or Generation Z, is said to have no “off switch” when it comes to technology. For this new group of post-Millennials, technology is said to be a “part of their DNA.” To understand the present and to see the future, we need to pay attention to the findings of Common Sense Media, which has reported that “screen addiction” is now a serious phenomenon among young people. On average, more than six and a half hours a day are spent by youth on devices using screens—TVs, tablets, phones, video games, computers—for nonschool purposes. Digital citizenship is now a topic being discussed in schools, particularly following the coronavirus pandemic, where most students learned online for a year or more. Now and in the future, we live in a world driven by technology—for companies, consumers, employees, and life in general.

Technology and its rapid innovations have been leading businesses toward becoming digital enterprises. A digital enterprise is an organization in which digital technology is at the center of all its business processes. It affects the way the organization operates, develops products and services, generates revenues, and engages with customers. It greatly affects its relationships with its employees. In short, a digital enterprise leverages technology in support of its mission, values, and operations. Though many organizations use digital technology in one form or another, many have not yet become digital enterprises, but most of them are on the way toward digital transformation. Digital transformation is a process in many companies currently as they strive to integrate digital technology into all areas of their businesses, resulting in fundamental changes in how the businesses operate and deliver value to their customers. It is safe to say that most successful businesses today are on the road toward digitalization, converting their processes toward computer-driven systems.

Beyond organizations, technology is how we sustain life and make it comfortable. But technology, as many have observed, is a two-edged sword. Many positive benefits flow from technological advances. By the same token, many new problems or challenges are posed by advancing technology, especially in the arena of business ethics. Futurist John Naisbitt, for example, has questioned whether advancing technology is a “liberating” or “destructive” force in society. He has said that, at best, technology supports and improves human life, and at its worst it alienates, isolates, distorts, and destroys.

Thinking positively, dynamic technological advances have become such a central part of our lives and doing business in the third decade of the 21st century that they must be carefully considered. More and more ethical issues for business and for society have arisen as a result of technological advances. Many believe that technology has developed at a speed that significantly outstrips the capacity of society, government, or business to grasp its consequences or ethical implications. In this chapter, we will explore some of these issues, knowing full well that other aspects related to technology will be touched on in other chapters as specific stakeholder groups are considered in more detail. As we brainstorm about what new technologies may have in store for business, one observer has even called it an “idolatry of data,” which has been enabled by the almost unimaginable data-gathering capabilities of new technology.

8.2. Technology and the Technological Environment

We have begun this chapter considering the power and influence of Big Data and artificial intelligence. Now it is time to consider the topic of technology, generally, because it does expand beyond the topics discussed so far. Technology means many things to many people. In this chapter, technology will refer to the “totality of the means employed to provide objects necessary for human sustenance and comfort.” It also is seen as a scientific method used in achieving a practical purpose. Technology refers to all the ways people use or apply their inventions, discoveries, data, and information to satisfy their needs and desires. Taken together, these technological advances have made work easier and more productive. But technology has also introduced new challenges, many of them social or ethical in nature.

In Chapter 1, we discussed the macroenvironment of business and how this total environment was composed of several significant and interrelated segments such as the social, economic, political, and technological. The technological environment, our current topic of concern, represents the total set of technology-based advancements or progress taking place in society. Pertinent aspects of this segment include new products, processes, materials, states of knowledge, and scientific advancements in both theoretical and applied senses. The rate of change and complexity of the technological environment have made it of special interest to business today. In the exploding information technology realm and the burgeoning field of biotechnology, the shape of how we are living, what products we are using, and what processes we are being exposed to is changing at an accelerating pace.

8.3. Benefits and Costs of Technology

Whatever the technological level of advancement, there are general benefits and undesirable side effects, or costs, of technology, and ethical challenges inherent in these technological advancements.

Few would dispute that society has benefited greatly from technology and innovation. We live better lives today as employees, consumers, and members of the community due to technology. Technology has helped us gain control over nature and to build for ourselves a civilized life. Through the ages, technology has benefited society in four main ways. It has increased society’s production of goods and services; it has reduced the amount of labor needed to produce goods and services; it has made labor easier and safer; and higher standards of living have been a direct result of labor-saving technology.

Though technologies have benefited people in many ways, there have also been some unanticipated costs and side effects as well—problems, issues, or effects not anticipated before technologies were designed and implemented. One major reason for this is that technologies are often implemented before much thought is given to possible costs, side effects, ethical problems, or downside risks. In fact, almost “every technology is used before it is completely understood. There is always a lag between an innovation and the apprehension of its consequences,” and we always are living in that lag. A major problem during this lag is that ethical issues and challenges are only later perceived and faced.

8.6. Biotechnology

The 20th century’s revolution in information technology is merging with the 21st century’s revolution in biotechnology. Indeed, Walter Isaacson labeled the 2000s as the “biotech century.” The field of biotechnology involves “using biology to discover, develop, manufacture, market, and sell products and services.”

The field of biotechnology carries with it significant implications for business and for business ethics, and we can only touch on these issues here. In fact, we now have a burgeoning growth industry—the biotechnology industry. The biotech industry today consists of small entrepreneurial start-up companies funded largely by venture capitalists, along with dozens of larger, more established companies. Most of the applications of biotechnology are in health care, the pharmaceutical industry, and agriculture. From a sustainability perspective, biotechnology is striving to heal, fuel, and feed the world.

In this section, we will discuss bioethics, genetic engineering, and genetically modified organisms (GMOs).

Chapter 9. Corporate Governance: Foundational Issues

Introduction

In Part IV of this book, we more closely examine how management has responded, and should respond, to the social, ethical, and stakeholder issues developed throughout this book. This chapter explores the ways in which company boards of directors and top managers govern the corporation. In Chapter 10, the view expands to look at how these social, ethical, and stakeholder issues fit into not only the strategy of the firm but also the management of risk, issues, and crises.

We begin by examining the concept of legitimacy and the part that corporate governance plays in establishing the legitimacy of business. Then, the role of social activism is introduced as both establishing and challenging the legitimacy of business. We then explore how good corporate governance can mitigate the problems created by the separation of ownership and control and examine some of the specific challenges facing those involved in corporate governance today. All of these concepts help to improve businesses’ CSR, sustainability, and business ethics.

Chapter 7. Ethical Issues in the Global Arena

Introduction

The growth of global business as a critical element in the world economy is one of the most important developments of the past half century, but it also has been an increasingly fertile ground for corruption and ethical challenges. Epstein and Hanson refer to the global level as potentially part of the “Bad Orchard” level. At this competitive, global level, ethical behavior is much more challenging and misconduct is more likely. In the United States and elsewhere, domestic issues have been made immensely more complex by the escalating international growth of commerce. At the same time, the internationalization of business has created unique challenges of its own. With the rise of global business, international markets have been seen as natural extensions of an ever-expanding global marketplace that must be pursued if firms are to remain competitive.

This expanded global marketplace has been referred to also as the transnational economy. A useful definition of the transnational or global economy is as follows: trade in goods, a much smaller trade in services, the international movement of labor, and international flows of capital and information.

Most observers have assumed that international business would continue its rapid growth of the past two decades and that, increasingly, companies and countries would become more integrated with the rest of the world. Global trade statistics, however, suggest that after a burst of globalization about a decade ago, world business has been more in a period of consolidation, possibly even retrenchment. Beginning with the global financial crisis of 2009, growth in international trade has become sluggish. With the global pandemic serving as a significant overlay beginning in 2020, the challenges have been even greater. French President Emmanuel Macron has said that the coronavirus “will change the nature of globalization, with which we have lived for 40 years.”

This is why some business experts have begun to think that the globalization moment is over. Why, for example, would one want to offshore jobs to China when Chinese workers are demanding and getting large pay raises? Why would a company want to expand its supply chain when it might be interrupted by terrorists? These and other important questions are being asked.

Not only has world economic growth slowed, but global instability in the form of geopolitics has become more intense than in any recent period. Geopolitical issues that have now intertwined governments with business include global migration patterns, tariffs, trade wars, terrorism, and corruption. In spite of this, the most recent survey of CEOs says that they expect global economic growth to improve beginning in 2021. McKinsey & Company has observed that “the resilience that businesses have developed in the face of disruption (the pandemic) can provide a new foundation for growth.”

Some companies are beginning to question the breadth of their operations and are worried about their vulnerability to regional instabilities. Not only has business growth slowed in the global economy, but it has also been getting more complex and subject to increasing disruptive changes. Researchers at the McKinsey Global Institute have observed that there are four trends or forces that are transforming the nature of the global economy and, hence, global business: the rise of emerging markets, the accelerating rate of technological change on market competition, an aging world population, and greater connectedness in movements of trade, capital, people, and data. These trends have been ushering in a dynamic, new phase of globalization.

The complexity and intricacies of the transnational economy and the globalization of business are seen visibly when social or ethical issues arise. At best, business ethics is difficult when we are dealing with one culture. Once two or more cultures intersect, along with the rapid changes in each of them, it gets extremely complex. Managers must deal not only with differing customs, protocols, and ways of operating but also with differing concepts of law and standards of acceptable business practices. All of this is then exacerbated by the fact that world political issues become intertwined. What might be intended as an isolated corporate attempt to bribe a foreign government official, in keeping with local custom, could readily explode into major international political tensions between two or more countries.

7.1. Challenges in the Global Environment

There are five major challenges that virtually all businesses face in doing business internationally. These include language barriers, cultural differences, managing global teams, currency exchange and inflation rates, and nuances of foreign politics, policy, and relations. Underlying these challenges as they operate in a multinational, business environment, companies also have to deal with several complex issues. One is that of achieving corporate legitimacy as the multinational corporation (MNC), or multinational enterprise (MNE), seeks to be recognized and accepted in an unfamiliar society. A second and related problem is the fundamentally differing philosophies that may exist between the firm’s home country and the host country in which it seeks to operate. For firms to be perceived as legitimate in the eyes of a host country, they must fulfill their social responsibilities and be good corporate citizens abroad just as they were expected to do so at home. Sometimes being socially responsible has different meanings in different countries.

Closely related to the legitimacy issue is the dilemma of MNCs that have quite different cultural or philosophical perspectives from those of their host countries. The philosophy of Western industrialized nations, and thus their MNCs, has focused on economic growth, efficiency, specialization, free trade, and comparative advantage. By contrast, many developing countries or emerging economies have different priorities. Other important objectives for them might include a more equitable income distribution or increased economic self-determination. In this context, the economically advanced nations may appear to be inherently exploitative in that their presence may perpetuate the dependency of the poorer nation. Very large MNCs have budgets that exceed those of many small countries. Thus, critics of MNCs say they have too much power and undue political influence over governments and can exploit developing nations. These basic challenges set the stage for examining how ethical problems arise in the global environment.

An important topic that has come up in recent years has to do with the diverse views about corporate social responsibility (CSR) relative to business–government relationships that occur in different regions of the world. For example, Scherer and Palazzo have noted that under conditions of globalization, the strict division of responsibilities between private businesses and nation-state governments do not hold as much everywhere. They observe that many business firms have begun to assume social and political responsibilities that extend beyond legal requirements and fill some vacuums in global governance. Thus, there is an emerging, politicized concept of CSR that is occurring in some parts of the world. We discussed this notion of political CSR in Chapter 2, and we continue the conversation in Chapter 18 when we discuss business’s influence on government. Though this changing relationship between business and government is not occurring everywhere, it is a factor that needs to be considered in some regions of the world. It is in the global business environment where it has become most applicable.

Social, cultural, and ethical tensions are built into global business. MNCs attempt to bridge the cultural gaps between two or more cultures; yet, as they attempt to adapt to local customs and business practices, they are assailed at home for not adhering to the standards, practices, laws, or ethics of their home country.

Figure 7-1 graphically depicts the dilemma of MNCs caught between the characteristics and expectations of their home country and those of one or more host countries. They often find themselves in an almost unmanageable situation but cannot be deterred from finding sustainable solutions if they desire to expand to markets abroad.

Figure 7-1 The Dilemma of the Multinational Corporation

Details

Spotlight on Sustainability A Global Sustainability Movement: Earth Hour

The celebration known as Earth Hour was started in Australia in 2007 by the World Wide Fund for Nature (WWF). The organization’s mission is to stop degrading Earth’s natural environment and to create a low-carbon future for planet Earth.

Earth Hour is a global sustainability movement that was initiated with the hope that each year will bring about a continued celebration. The first Earth Hour was held in Australia, and after national acclaim, it gained high international interest, with more and more cities beginning to sign up for the next Earth Hour campaign.

Held each year on the last Saturday of March, Earth Hour engages millions of concerned citizens in 180 countries and territories to turn off their lights and show support for the planet. Beyond the switching-off event, Earth Hour has become a catalyst for positive sustainability impact. You can learn more about Earth Hour’s mission and events in your country by going to https://www.earthhour.org/take-part/events.

Sources: Earth Hour, https://www.earthhour.org/our-mission, accessed March 26, 2021; “Earth Hour 2021,” https://www.worldwildlife.org/pages/earth-hour, accessed March 26, 2021; Earth Hour, Facebook, @earthhour, https://www.facebook.com/earthhour/, accessed March 26, 2021.

7.2. Ethical Issues in the Global Business Environment

The challenges for companies operating in the global business environment include issues of corporate social responsibility, generally, and business ethics, specifically. Our primary focus in this chapter will be on business ethics, but the issues related to the global dimension of CSR should not be forgotten. For many companies, most of the ethical problems that arise in the global environment are in the same categories as those that arise in their domestic environments. These ethical issues reside in all of the functional areas of business: operations, marketing, finance, accounting, and management. These issues embrace the fair treatment of stakeholders—employees, customers, the community, and competitors—and involve product safety, plant safety, advertising practices, human resource management, human rights, environmental problems, business practices, and so on.

These ethical issues may seem to be somewhat fewer in developed countries, but they exist there as well. The ethical challenges seem to be more acute in less-developed countries (LDCs) or emerging economies because these countries are at earlier stages of economic development and often do not have a legal or ethical infrastructure in place to help protect their citizenry. This situation creates an environment in which there is temptation to operate with lower standards, or perhaps no standards, because fewer government regulations or activist groups exist to protect the stakeholders’ interests. In the LDCs, the opportunities for business exploitation and the engagement in questionable practices (by developed countries’ standards) are abundant.

7.3. Improving Global Business Ethics

It is clear from the discussion up to this point that business ethics is much more complex at the global level than at the domestic level. The complexity arises from the fact that a wide variety of value systems, stakeholders, cultures, forms of government, socioeconomic conditions, and standards of ethical behavior exist throughout the world. Recognition of diverse standards of ethical behavior is important, but if we assume that firms from developed countries should operate in closer accordance with developed countries’ ethical standards than with those of developing countries, the strategy of ethical leadership in the world will indeed be a challenging one.

Because the United States and European multinationals have played such a leadership role in world affairs—usually espousing fairness and human rights—these firms have a heavy responsibility, particularly in underdeveloped countries and developing nations. The power–responsibility equation and the Iron Law of Responsibility (see Chapter 1) suggest that these firms have a serious ethical responsibility in global markets. That is, the larger sense of ethical behavior and social responsibility derives from the enormous amount of power these countries have.

In the following section, we will first discuss the challenge of honoring and balancing the ethical traditions of a business’s home country with those of its host country. Next, we will discuss four recommended strategies for conducting business in foreign environments. We will conclude by taking a look at some other steps companies are taking to improve their global ethics.

Chapter 8. Business Ethics and Technology: The Digital Enterprise

Introduction

We live in an age dominated and driven by rapidly advancing technology. As Nancy Gibbs, editor of Time magazine, observed, “technology … accelerates and complicates.” In fact, technological change is significantly outpacing generational time spans. The world can look different in the span of a few years, as businesses have come to realize. At one time it was common for chief financial officers to be strongly positioned to become CEOs. Today, it is the chief technology officer (CTO) of major firms. We are now in the digital era, the era of the digital enterprise, and strong technology leadership has become the key to business success.

The latest working generation, called the iGeneration or Generation Z, is said to have no “off switch” when it comes to technology. For this new group of post-Millennials, technology is said to be a “part of their DNA.” To understand the present and to see the future, we need to pay attention to the findings of Common Sense Media, which has reported that “screen addiction” is now a serious phenomenon among young people. On average, more than six and a half hours a day are spent by youth on devices using screens—TVs, tablets, phones, video games, computers—for nonschool purposes. Digital citizenship is now a topic being discussed in schools, particularly following the coronavirus pandemic, where most students learned online for a year or more. Now and in the future, we live in a world driven by technology—for companies, consumers, employees, and life in general.

Technology and its rapid innovations have been leading businesses toward becoming digital enterprises. A digital enterprise is an organization in which digital technology is at the center of all its business processes. It affects the way the organization operates, develops products and services, generates revenues, and engages with customers. It greatly affects its relationships with its employees. In short, a digital enterprise leverages technology in support of its mission, values, and operations. Though many organizations use digital technology in one form or another, many have not yet become digital enterprises, but most of them are on the way toward digital transformation. Digital transformation is a process in many companies currently as they strive to integrate digital technology into all areas of their businesses, resulting in fundamental changes in how the businesses operate and deliver value to their customers. It is safe to say that most successful businesses today are on the road toward digitalization, converting their processes toward computer-driven systems.

Beyond organizations, technology is how we sustain life and make it comfortable. But technology, as many have observed, is a two-edged sword. Many positive benefits flow from technological advances. By the same token, many new problems or challenges are posed by advancing technology, especially in the arena of business ethics. Futurist John Naisbitt, for example, has questioned whether advancing technology is a “liberating” or “destructive” force in society. He has said that, at best, technology supports and improves human life, and at its worst it alienates, isolates, distorts, and destroys.

Thinking positively, dynamic technological advances have become such a central part of our lives and doing business in the third decade of the 21st century that they must be carefully considered. More and more ethical issues for business and for society have arisen as a result of technological advances. Many believe that technology has developed at a speed that significantly outstrips the capacity of society, government, or business to grasp its consequences or ethical implications. In this chapter, we will explore some of these issues, knowing full well that other aspects related to technology will be touched on in other chapters as specific stakeholder groups are considered in more detail. As we brainstorm about what new technologies may have in store for business, one observer has even called it an “idolatry of data,” which has been enabled by the almost unimaginable data-gathering capabilities of new technology.

8.2. Technology and the Technological Environment

We have begun this chapter considering the power and influence of Big Data and artificial intelligence. Now it is time to consider the topic of technology, generally, because it does expand beyond the topics discussed so far. Technology means many things to many people. In this chapter, technology will refer to the “totality of the means employed to provide objects necessary for human sustenance and comfort.” It also is seen as a scientific method used in achieving a practical purpose. Technology refers to all the ways people use or apply their inventions, discoveries, data, and information to satisfy their needs and desires. Taken together, these technological advances have made work easier and more productive. But technology has also introduced new challenges, many of them social or ethical in nature.

In Chapter 1, we discussed the macroenvironment of business and how this total environment was composed of several significant and interrelated segments such as the social, economic, political, and technological. The technological environment, our current topic of concern, represents the total set of technology-based advancements or progress taking place in society. Pertinent aspects of this segment include new products, processes, materials, states of knowledge, and scientific advancements in both theoretical and applied senses. The rate of change and complexity of the technological environment have made it of special interest to business today. In the exploding information technology realm and the burgeoning field of biotechnology, the shape of how we are living, what products we are using, and what processes we are being exposed to is changing at an accelerating pace.

8.3. Benefits and Costs of Technology

Whatever the technological level of advancement, there are general benefits and undesirable side effects, or costs, of technology, and ethical challenges inherent in these technological advancements.

Few would dispute that society has benefited greatly from technology and innovation. We live better lives today as employees, consumers, and members of the community due to technology. Technology has helped us gain control over nature and to build for ourselves a civilized life. Through the ages, technology has benefited society in four main ways. It has increased society’s production of goods and services; it has reduced the amount of labor needed to produce goods and services; it has made labor easier and safer; and higher standards of living have been a direct result of labor-saving technology.

Though technologies have benefited people in many ways, there have also been some unanticipated costs and side effects as well—problems, issues, or effects not anticipated before technologies were designed and implemented. One major reason for this is that technologies are often implemented before much thought is given to possible costs, side effects, ethical problems, or downside risks. In fact, almost “every technology is used before it is completely understood. There is always a lag between an innovation and the apprehension of its consequences,” and we always are living in that lag. A major problem during this lag is that ethical issues and challenges are only later perceived and faced.

8.6. Biotechnology

The 20th century’s revolution in information technology is merging with the 21st century’s revolution in biotechnology. Indeed, Walter Isaacson labeled the 2000s as the “biotech century.” The field of biotechnology involves “using biology to discover, develop, manufacture, market, and sell products and services.”

The field of biotechnology carries with it significant implications for business and for business ethics, and we can only touch on these issues here. In fact, we now have a burgeoning growth industry—the biotechnology industry. The biotech industry today consists of small entrepreneurial start-up companies funded largely by venture capitalists, along with dozens of larger, more established companies. Most of the applications of biotechnology are in health care, the pharmaceutical industry, and agriculture. From a sustainability perspective, biotechnology is striving to heal, fuel, and feed the world.

In this section, we will discuss bioethics, genetic engineering, and genetically modified organisms (GMOs).

Chapter 9. Corporate Governance: Foundational Issues

Introduction

In Part IV of this book, we more closely examine how management has responded, and should respond, to the social, ethical, and stakeholder issues developed throughout this book. This chapter explores the ways in which company boards of directors and top managers govern the corporation. In Chapter 10, the view expands to look at how these social, ethical, and stakeholder issues fit into not only the strategy of the firm but also the management of risk, issues, and crises.

We begin by examining the concept of legitimacy and the part that corporate governance plays in establishing the legitimacy of business. Then, the role of social activism is introduced as both establishing and challenging the legitimacy of business. We then explore how good corporate governance can mitigate the problems created by the separation of ownership and control and examine some of the specific challenges facing those involved in corporate governance today. All of these concepts help to improve businesses’ CSR, sustainability, and business ethics.