The disadvantages of international business ethics

Written by catherine capozzi
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Maintaining business ethics is a worthy goal for all multinational corporations, but not always possible or advantageous. The reality of international business is that upholding these arbitrary obligations comes with severe disadvantages. In many ways, abiding by a self-imposed standard of business ethics impede a company's ability to eke a profit when others are far less likely to abide by similar unenforceable ethical obligations.

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Wage Ethics

Few consumers would profess that 8-year-olds working 16-hour days in a dimly lit factory is ethical. And yet several large multinational corporations disregard these issues in favour of producing a product at a significantly lower cost. John M. Wage, author of the book, "Ethics for International Business," explains the quandary arises when foreign governments have no set minimum wage. In these situations, companies can contract foreign workers and have them work for less than a liveable wage.

Corporations that wish to maintain strong business ethics by paying local, American workers a higher wage for the same job that an overseas worker could do for less face a significant disadvantage. Because consumers typically value less expensive products over ones that are not made in sweatshops, companies that adopt fair wage practices lose over ones that do not.

Bribery and Grease Payments

Some countries, particularly African nations, are accustomed to receiving "grease payments" as a means of getting bureaucratic tasks achieved in less time or currying favour with local authorities. For instance, a 2009 "Harper's Magazine" article explains that Halliburton paid Nigerian officials £117 million to secure contracts worth £3 billion. Though American companies are not allowed to offer grease payments, in situations such as Halliburton's, the company benefited from its exchange even after settling the matter in court. Thus, other companies that abide by the ethical rules are at a disadvantage to companies that do not.

Lack of Enforceability

Another disadvantage of maintaining ethics in international business is the lack of enforcement for the other companies who break the rules. Chad Philips Brown states in his book, "Self-Enforcing Trade: Developing Countries and WTO Dispute Settlement," that low preferential tariffs are nearly impossible to enforce. Therefore, countries that charge a high amount for certain imports to protect their local economy face few consequences despite the illegality of the act as outlined by the World Trade Organization.

Potential and Consideration

Consumers exert considerable influence over the ethical behaviour of corporations, particularly in international affairs. For instance, the high demand for fair trade coffee compelled many large companies such as Starbucks and Pete's Coffee to offer it as part of their menus. Similarly, consumer demand for wooden products not originating from rainforests is also increasing, which in turn inspires companies to use renewable, sustainable materials such as bamboo. Therefore, one of the strongest drivers of international business ethics is the consumer and his spending habits.

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