Essay Example on Ethical Leadership and Decision-Making

In the past four decades, globalization has increased at a fast rate which has resulted in the expansion of business organizations beyond their domestic boundaries. The expansion and entrance in foreign markets are often marked with challenges as business leaders try to maintain clarity of their morality and ethics in the new market with a new and distinct culture. The absence of universally accepted attitudes and regulations to define standards of ethics introduces complexities and uncertainties in the decision-making process. Some of the tough decisions that business leaders in foreign markets have to make relate to whether to go along with the host country's discriminatory practices in the workplace? Should the company conduct business with regimes and individuals that participate in violation of political and civil rights? These scenarios prove challenging even to the most experienced and informed executives. In order to streamline decision making and arrive at the most appropriate solutions, it is important to understand that what works at the domestic can fail miserably in another market. In this view, this paper presents some of the principles and policies that could help business leaders navigate through cultural differences and establish an ethical business culture.

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According to Clayton (2012), the first principle/guideline for leaders is to understand that conducting business in a foreign country is different from doing business in the domestic market. Statistics show that the vast majority of American businesspersons have little or no experience with doing business outside the US. That could be attributed to the fact that only 1% of US college students study outside the US for at least one semester. Also, many organizations seldom send their employees overseas for knowledge and experience exchange. For this reason, it is critical that the top executive team evaluates their limitations and those of the employees immediately after arriving at the new business environment (Carter & Gagne, 1988). The evaluation helps to determine the most likely trading partners, their country of origin, their culture and business ethics and how they relate or differ with yours, as well as the maximum potential and capabilities of your team.

The next principle involves doing due diligence on the workforce hired as well as the companies and suppliers you intend to engage in the manufacture and distribution of products (Brown & Trevinno, 2006). It is typical to find out that the most fundamental qualifications for positions like head of marketing, head of finance, and other senior positions are different in the foreign market than at home. Regardless, there are minimum (threshold) qualifications that are accepted and used as benchmarks universally. In such cases, though rare, it is advisable to use American standards during recruitment so as to gain competitive advantage especially when the market is a developing economy. In addition, it is imperative that due diligence for all third parties and partners be conducted with at most seriousness. According to a report by SEC in 2012, more than 75% of all cases under the Foreign Corrupt Practices Act (FCPA) relate to organizations that are charged for misconduct of third parties (Guide, F. C. P. A., 2012). The Department of Justice and the Securities Exchange Commission clearly underscore that any business enterprise that fails to carry out thorough due diligence and background investigation on the third party will get no credit for having a compliance program when the third party violates the FCPA while working for the organization (Guide, F. C. P. A., 2012).

Even with a comprehensive guideline and policy framework to direct decision-making in the foreign market, it might be difficult to commit to it especially when the host country has ethical standards that seem to be of lower standards than those of the home country. In such cases, it is advisable to handle every issue individually and based on the context (Beck, 2015). To do this, you must view the situation from two philosophical perspectives that are widely described as competing. One perspective is cultural relativism and the other one is ethical imperialism (Beck, 2015). Based on the tenets of cultural relativism, there is no culture with better ethics than the other (Beck, 2015). As such, international rights and wrongs do not exist. For instance, if Indonesians accept and tolerate bribery, it should not matter. Their attitude towards bribery is not different from that of people from Denmark who condemn bribes. In the same way, it should not matter that Belgium does not find insider trading morally unacceptable. Not criminalizing insider trading is no different and no more or less ethical than enforcing laws that make insider trading illegal.

Cultural relativism is anchored on the idea that "When in Rome, do as the Romans do." That creed is highly tempting and comforting particularly when conforming to the local culture means losing a business opportunity. However, the limitations of cultural relativism are more clear when the issue in question involves practices that are more detrimental than insider trading and petty bribes. For instance, the late 1980s were marked by the dumping of highly toxic waste by European companies along the Nigerian coast. The waste comprised of highly toxic polychlorinated biphenyls and was unloaded by unprotected workers who dumped it near residential areas (Brownell, 2011). Both the workers and the residents were unaware of the contents and its effects.

While it is easy to point fingers at administrations and people that allow such activities, it is vital to first understand that many countries do not have the required framework to police and control multinationals even if they wanted to police them. As a result of the combination of weak enforcement and regulations, unscrupulous companies engage in harmful activities. A cultural relativist would be okay and not condemn the outcome of this behavior. Even with established health and safety procedures, sometimes they are inadequate to protect those involved from health hazards. In such cases where the contract or the business dealing meets the required standard, an ethical business person should desist. On this account, it is true to say that cultural relativism is morally and ethically blind (Donaldson, 2016). Therefore, a business leader should understand that there are fundamental values that cross cultures and organizations must uphold them.

On the other hand, ethical imperialism is anchored on the principle that people should practice everywhere as they practice home. Despite seeming appealing, it has many inadequacies. For instance, suppose a company operating in Saudi Arabia introduced a course on sexual harassment in the workplace. On the tenant of global consistency, the executives applied the same approach as that used in the US to train Saudi employees. Given that Saudi Arabia is a society whose culture is governed by strict rules on men and women interactions, the training session was a total failure and even offended the participants (Brooks & Dunn, 2011). The problem with ethical imperialism is absolutism that is defined by three principles. One, there is only one list of truths, two; the truths can only be expressed with one array of concepts, three; the concepts call for consistent behavior around the world (Donaldson, 2016).

The main limitation of the first principle is that it contradicts with the universal belief that different cultural traditions deserve respect. In some societies like Japan and China, loyalty to society is the core and pillar of all ethical conduct. In particular, the Japanese define ethical behavior as loyalty to the company, country, and business network. On the other hand, Americans value liberty more than loyalty (Donaldson, 2016). As such, it is difficult to say where the truth lies but an absolutist approach would require the business leader to select one. The second principle (one set of concepts) appears inadequate because the United Nations' Universal Declaration of Human Rights borrows from many cultural traditions across the world. Therefore, people learn ethics in the context of their cultures hence no list of universal ethics.

From the discussion above, a company that adopts an absolutist approach in a host country with different standards of ethical behavior could find itself in a precarious situation. Also, leaders who decide to adopt the host's country ethics might end up regretting later. That was true for one manager of a US company operating in China who reported a Chinese employee for stealing a product worth less than one thousand dollars. The employee was charged and executed in accordance with the local laws which caused feelings of guilt on the manager (Chang, 2010). That shows the dilemma and confusion around if to adopt the host's country ethical standards or to adopt the absolutist approach. While many would adopt the traditional litmus of figuring what would people think of they read about the actions in the papers, it is still an unreliable guide.

On that account, it is critical that business leaders take an active role in helping their employees differentiate between business practices that are nothing more than just different than those at home and the practices that are wrong. The answer is neither with the relativist approach nor the absolutist approach but rather creating a balance and shaping the organizational culture around the following three fundamental principles:

• Respect for core human values which in turn indicate the fundamental or lowest moral limit for all business practices.
• Respect and understanding of the local traditions.
• Understand and recognize that context should inform all decisions that pertain to right and wrong.

In conclusion, the discussion above illustrates that there are various ways at which business leaders can use to inform ethical-decision making. However, many of those ways might be flawed and result in bad business decisions if they are not centered on three key principles. These principles include respect for human values, respect for local culture, and understanding that context matters in decision-making. Essentially, these principles summarize all the policies and framework for ethical decision-making.

References

Beck, D. (2015). Between Relativism and Imperialism: Navigating Moral Diversity in CrossCultural Bioethics. Developing world bioethics, 15(3), 162-171.

Brooks, L. J., & Dunn, P. (2011). Business & professional ethics for directors, executives & accountants. Mason, OH: South-Western, Cengage Learning.

Brown, M. E., & Trevino, L. K. (2006). Ethical leadership: A review and future directions. The leadership quarterly, 17(6), 595-616.

Brownell, E. (2011). Negotiating the new economic order of waste. Environmental History, 16(2), 262-289.

Carter, J. R., & Gagne, J. (1988). The dos and don'ts of international countertrade. MIT Sloan Management Review, 29(3), 31.

Chang, C. M. (2010). Service systems management and engineering: Creating strategic differentiation and operational excellence. Hoboken, N.J: John Wiley & Sons.

Clayton, S. (2012, June 1). Top Ten Dos and Don'ts for US Companies Doing Business Internationally. Retrieved February 15, 2019, from https://www.acc.com/legalresources/publications/topten/ttdadfucdbi.cfm

Donaldson, T. (2016). Values in Tension: Ethics Away from Home. Readings and Cases in International Human Resource Management, 403-415. doi:10.4324/9781315668703-31

Guide, F. C. P. A. (2012). A Resource Guide to the US Foreign Corrupt Practices Act. By the Criminal Division of the US Department of Justice and the Enforcement Division of the US Securities and Exchange Commis...