7 Ethical Issues in Business

National and Multinational Corporations are spread across the globe, but their operations vary from one another. Therefore it is imperative to know the ethical issues that governed their businesses. This is because domestic business is not the same as international business. Thus, the ethics that governed domestic businesses are quite different from that of international businesses. 

Ethical issues arise because of the differences in economic development, politics, legal systems and culture. The term ethics refers to accepted principles of right or wrong that governed the conduct of a person, the members of a profession, or the actions of an organization. Business ethics are the accepted principles of right or wrong governing the conduct of business people. This article examines ethical issues as they affect business activities.

Ethical issues in Business

Most of the ethical issues in businesses are rooted in the fact that political systems, laws, economic development and culture vary significantly from nation to nation.

What is considered normal practice in one nation may be considered unethical in another. Because they work for an institution that transcends national borders and culture, managers, especially for international firms need to be particularly sensitive to these differences. Some of these ethical issues are thus briefly discussed below:

Employment Practice

Working conditions vary from one nation to another, from one firm to another. This therefore raise some questions such as when work conditions in a host nation are clearly inferior to those in multinationals home nation, what standards should be applied? Those of the home nation or those of the host nation may apply something in between.

While some people may support that pay and work conditions should be the same across the nation, how much divergence is acceptable? For example, Nigeria operates eight hours of daily work, while some nations such as Britain operate twelve hours of daily work. Also per day or hourly pay vary among nations of the world. For instance Nigeria is considered as one of the least pay country, hence, it is extremely difficult to suggest standards that should be applied.

However, international business managers should endeavour to study employment practices as they apply to those host countries of their business.

Human Rights

Questions of human rights can arise in international business and as well as on domestic business. Some basic human rights are not respected in some nations, especially by the developing countries. For instance, rights that we take for granted in developing nations, such as freedom of association, freedom of speech, freedom of assembly, freedom of movement, freedom from political repression and so on, are by no means universally accepted. 

For example, during days of apartheid system in South-Africa, blacks were not permitted to participate in socio-economic activities which were dominated by the whites. But after the independence, this practice was abolished. In addition, during military regime in Nigeria, many citizens including journalists and human right activists were wrongfully detained. However, Nigeria operates multi-party systems as a means of challenging the wrongs of the government in power. As business man you should understand politic- business relationship, this is because the effects on party in power may affect business activities either positively or negatively.

The issue of foreign multinational firms doing business abroad violates human rights is critical in international business. For example, Nigeria is a country where serious questions have arisen over the extent to which foreign multinationals doing business in the country have contributed to human rights violation? For instance, the largest foreign oil producer in the country -Royal Dutch Shell has been criticized in Niger Delta over environmental pollution. Recently, Jonathan’s administration ordered Shell Company should bear some environmental costs of their operations in Niger delta. Notwithstanding, as business managers, issues of human rights should be critical studied and apply accordingly.

Environmental Pollution

Ethical issues arise when environmental regulations in host nations are inferior to those in the home nation. For instance, many developed nations have substantial regulations governing the emission of pollutions, the dumping of toxic chemicals and so on. Some of these regulations are often lacking in developing nations, such like Nigeria. For example, according to a 1992 report prepared by environmental activists in Nigeria in Niger Delta region, it state that

Apart from air pollution from the oil industry’s emissions Flares day and night. Producing poisonous gases that are silently and systematically wiping out vulnerable air­borne biota and endangering the life of plants, game and man himself, we have widespread water pollution and Soil/land pollution that results in the death of most aquatic eggs and Juvenile stages of the life of finfish and shellfish on the other hand, whilst, on the other hand, agricultural land contaminated with oil spills, becomes dangers for farming, even when…

The implication of this is that pollution controls applied by foreign companies in Nigeria were much lesser than those in developed nations, such like UK and USA. Therefore, should a multinational feel free to pollute the developing nations? Is there a danger that a moral management might move production to a developing nation because costly pollution controls are not required, and the company is therefore free to despoil the environment and perhaps endanger local people in its quest to lower production costs and gain a competitive advantage?

These questions take on added importance because some parts of the environment are a public good that no one owns but anyone can despoil. No one owns the atmosphere or the oceans, but polluting both, no matter where the pollution originates, harm all. 

The atmosphere and oceans can be viewed as a global commons from which everyone benefits but for which no one is specifically responsible. In such cases, a phenomenon known as the tragedy of the commons becomes applicable. The tragedy of the commons occurs when individuals overuse a resources held in common by all, but owned by no one, resulting in its degradation. The phenomenon was first named by Garrett Hardin when describing a particular problem in six-tenth century in England.

Corruption

Corruption has been a problem in almost every society in history and it continues to be one today. There are always have been and always will be corrupt government officials. Some businesses managers have taken advantage of this ill practice by making payments to these officials. For example, Carl Kotchian, the president of Lockheed, made a $12.5 million payment to Japanese agents and government officials to secure a large order for Lockheed’s TriStar Jet from Nippon Air. 

When the payments were discovered, US officials charged Lockheed with falsification of its records and tax violations. Although such payments were supposed to be an accepted business practice in Japan, the recreations created a scandal there too. The government ministers in question were criminally charged, one committed suicide, the government fell in disgrace and the Japanese people were outraged. Apparently, such a payment was not an accepted way of doing business in Japan. The payment was officials, to secure a large order that might otherwise have gone to another manufacturer, such as ‘Boeing’. This case took place in the 1970s.

Recently, the Senate Committee on Sale of Government Properties in Nigeria ordered the Bureau for Public Properties (BPP) for a public hearing over the sale of government properties during Obasanjo’s administration. During the public hearing, the civil servants, and the communities where these properties were situated alleged that they were not carried along, and the money collected from such sales was not remitted to government accounts. 

It was revealed also during the public hearing that the foreigners who claimed to have bought these properties especially hotels, corporations, estates, etc, did not pay the actual money bidding for these properties, and they have overused such properties without remittance to the government of Nigeria. The senate frown that this is an illegal act in Nigeria and thus the concerned victims are being prosecuted appropriately.

Similarly in the Oil industry, some acts are considered lawful and unlawful in some nations. For instance, oil buckury and subsidy payments are considered lawful, hence Nigeria government paid oil marketers these subsidies, and illegal buckers are not always persecuted. Where attempts are made in persecuting the actors and actresses, some of these cases are not always conclusive in Nigeria. Whereas in advanced nations, such like UK and Canada, such acts are considered unlawful, and the actors and actresses are persecuted accordingly in relations to the laws of the country.

Research revealed that corruption reduces the returns on business investment and leads to low economic growth. In a country, where corruption is common, unproductive bureaucrats who demand side payments for granting the enterprise permission to operate may siphon off the profits fro a business activity. This reduces business incentives to invest and may retard a country’s economic growth rate.

There are countless examples that could be sited, nevertheless, the message here is that business investors should know each country business practice, especially where he/she wish to do business.

Moral Obligation

Multinationals have the power to control their resources and to move production from country to country. Nevertheless, this power is constrained not only by laws and regulations, but also by the discipline of the market and the competitive process. Some moral philosophers argued that multinationals should give back something to the society where they derived profits. This refers to social responsibility 

The concept of social responsibility refers to the idea that business people should consider the social consequences of economic actions when making business decisions and that there should be a presumption in favour of decisions that have both good economic and social consequences. Advocates of this approach argued that businesses, particularly big successful businesses, such as Shell, Mobil, Total, etc need to recognise their noble obligations and should give something back to the societies that made them in their business activities

On the contrary, there are examples of multinationals in Niger Delta of Nigeria, such Shell, Mobil, etc that have abused their power by neglecting social responsibilities. Most often, the areas of operations by these companies have been polluted. But, companies such as MTN, GLO, Airtel, etc in Nigeria have acknowledged a moral obligation to use their powers to enhance social welfare in the communities where they do business, by building schools, building hospitals, offering scholarships, etc.

In conclusion, as business managers, it is pertinent to critically study the ethics of the countries you wish to do business with and the policies that governed such business activities.