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International Business Ethics
Author(syf Richard T. De George
Source: Business Ethics Quarterly, Vol. 4, No. 1 (Jan., 1994yf S S 9
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Richard T. De George
International
business ethics, as the term implies, cannot be national in charac?
ter, anymore than international law can be national in character. Yet the anal?
ogy to law is as misleading as it is enlightening. For although we can speak of
American, German or Japanese law, it is odd to speak of American, German or
Japanese ethics. The reason is that ethics is usually thought to be universal.
Hence there is simply ethics, not national ethics. Despite this, there is a sense
that can be given to American business ethics or German business ethics. Ameri?
can business ethics does not refer to American as opposed to German ethics, but
rather to the approach taken by those who do business ethics in the United States.
What characterizes the American approach is not that it uses a special ethics or
a national ethics, but that it is concerned with certain problems that are embed?
ded in the American socio-economic-political system and faced by American
business.1 German or Japanese business ethics differs from American business
ethics in the cases and topics it deals with, in the different set of background
institutions it takes for granted or investigates, and in the different culture,
history, and social setting in which business operates.2
The same is true of what is often called international business ethics insofar as
we can distinguish American, German, Japanese approaches to it. International
business ethics might refer simply to the comparison of business practices and
their ethical evaluation in different countries; it might investigate whether there
are in fact ethical norms commonly recognized in all countries that should
govern international business and economic transactions, and if there are vari?
ations in ethical norms, whether multinational firms are bound by the ethical
norms of their mother country, by the ethical norms of their host countries, by
either, by both, or by neither. International business ethics might involve broad
issues about the economic inequality of nations, the justice of the present inter?
national economic order, the ethical status and justifiability of such organiza? tions as the World Bank and the International Monetary Fund and of their
structures and practices, as well as the ethical dimensions of international debt,
and the claimed economic dependence of some countries on others, or such
global issues as the role of industry in the depletion of the ozone level.3
The development of an American approach to international business ethics can
be traced back to a number of factors in America's historical and social develop? ment. After the Second World War the United States was the dominant figure on
the international scene. Europe, the Eastern Bloc, and Japan were all in the
process of recovery and rebuilding. That position of prominence was a new one
for the United States, and American business used it to good advantage. Lacking
?1994. Business Ethics Quarterly, Volume 4, Issue 1. ISSN 1052-150X. 0001-0009.
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colonies and the experience that goes with them, the United States had devel?
oped no clear guidelines for companies operating abroad. American companies
pursued their interests without any concomitant concept of noblesse oblige. The American involvement in Viet Nam produced a generation of critics who
attacked not only the government's pursuit of the war but the military-industrial
complex. The step from that critique to a critique of American business practices abroad was a small one, and one that not a few critics took easily and with a
vengeance. The attacks on American multinationals were many and varied.
Europe and Japan had recovered sufficiently to develop as competitors to Ameri?
can industry. From an ethical point of view trade with them posed few problems, since they were able to operate from a position of equality and were able to
defend their own interests. However, there were exceptions, such as the Lock?
heed scandal involving the paying of twelve million dollars to Japanese agents and government officials for a Tri-Star contract.4 This and similar scandals led
to Congress's passing the Foreign Corrupt Practices Act, which is probably the
single most important piece of American legislation regulating international
business ethics for American firms.
The underdeveloped nations, many of which had just recently emerged from
colonial status, were clearly not America's economic equals. Critics focused
their attention on the many issues that arose in these countries.
American multinationals were accused, often justifiably, of exploiting the less
developed nations in a variety of ways.5 One was by paying workers as little as
possible, sometimes less than a living wage. The fact that the pay was the same
as that offered by local businesses was held to be beside the point. Ironically, when American companies paid more than the going rate, then were accused of
drawing off the best workers and so undermining local industry. American fruit
and produce companies were accused of buying off the best land, using it for
export crops, and indirectly causing malnutrition or starvation among the local
population whose members could no longer grow enough on the remaining land
to feed themselves.
Exploitation was not limited to people but also to the raw materials of the less
developed countries. American MNCs were accused of buying raw materials
cheaply, and selling manufactured goods dearly. In these operations they were
frequently accused of dealing with corrupt elites or rulers, who were more
interested in their own personal gain than the good of the people of the country.
The American firms sought stable governments, and, fearing nationalization,
understandably often operated in countries ruled by rightist rather than by leftist
governments. The charge of consorting with dictators was not always misplaced.
Americans have prided themselves on respect for human rights. The civil
rights movement brought to their consciousness the long violation of human
rights of American blacks; the feminist movement made them conscious of the
economic equality of women. The result of this increased perception was pro?
jected onto the activities of American multinationals abroad. The poignant plight
ofthe South African Blacks struck American sensitivity in a special way and led
to a call for business to respect the human rights of the Blacks in South Africa,
to the adoption of the Sullivan Principles, and to calls for divestment and
disinvestment.6
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The disaster at Bhopal, India, involving a Union Carbide plant owned 50.9%
by the American parent company, fueled attacks on and concern with potentially
dangerous high technology American business operations abroad.7 It also led to
emphasis on discussions of "appropriate" technology and to increased concern
for the negative impact of high technology on less developed countries.
This broad brush picture of events since the Second World War forms the
background of American interest in international business ethics and to some
extent explains how it developed. The particular issues that comprise the Ameri?
can literature on international business ethics is in some ways idiosyncratic. The
literature has focused primarily on American multinationals.
Since ethics is universal and the same for all, American companies should
obey the same ethical rules abroad that they do at home. They should respect the
rights of workers, should not engage in bribery, should not undermine the local
culture, or impose American norms?both of which are considered a form of
cultural imperialism and unethical.
The development of the American approach to international business ethics in
many ways parallels the development of the American approach to business
ethics in general. Although some of those in the field have argued that there are
three levels of analysis appropriate to business ethics?that of the system of
American free enterprise as such, that ofthe corporation, and that ofthe individ?
ual within the corporation8?the major focus has been on corporations and cor?
porate managers.9 The difference is that there has been much less written about
corporate and managerial ethics on the international level than on the national
level.
If the picture I have painted is essentially accurate, then it is understandable
that American international business ethics may be different from international
business ethics in other parts ofthe world. The American focus has been primar?
ily on American MNCs, even though the Nestle boycott had as its focus the
Swiss parent company. The ethics of the international economic order has re?
ceived much more attention in South America, for instance, than in the United
States. The ILO is much stronger in Europe than in the United States.
What ofthe future? Since an American international normative business ethics
is a contradiction in terms, one might argue for the development of a truly
international normative ethics for business that is or would be widely, if not
universally, acknowledged. Clearly any such ethic cannot simply be the imposi?
tion by one nation of its values on the world, even though some Americans and
American companies seem to be engaged in such an attempt. A starting point is
those basic ethical norms on which all or the overwhelming majority of people
agree. For instance, there is such agreement on the prima facie immorality of
slavery and of killing innocent people. There are also basic norms necessary for
the conduct of business such as keeping promises, honoring contracts, telling the
truth, and respecting the lives and integrity of those with whom one engages in
business. Even on issues of extortion and gross bribery there is general consen?
sus that these are wrong, even though prevalent and tolerated in some countries.
Mores and customs obviously vary from country to country. An internationally
acknowledged normative ethics does not require a single culture or similar
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customs and mores in all countries. But even if most people agree that there is
only one ethics which is the same for all, differences in what is claimed to be
ethical must be adjudicated. Justice presents us with a prime example. Justice is
a central concept in business ethics and in international business ethics as well.
Yet we know that there are many conceptions of justice, and that though all may
agree that justice should be done, there are divergent views about what consti?
tutes justice in a particular case or on the international scene.
When nations differ about what is just, or whether a particular practice is just,
then none of the participants should simply assert and impose their view, even if
they are able to do so. Nor need they all agree on a single theory of justice.
Developing an international business ethics in this case involves taking into
account divergent interpretations of justice, different claims, and possibly op-
posing points of view. No side can ethically be forced to agree to a compromise
that it considers unethical; but in many cases compromise does not mean giving
up one's principles but enlarging one's scope to include other perspectives and
agreeing perhaps to less than one thinks one deserves.
This does not imply that one must give up one's own ethics. Rather integrity
requires that one have developed ethical views to which one adheres. The notion
of negotiating just agreements requires that each party to the agreement ap?
proach it from a developed point of view and with an ethical theory from which
they can judge whether the agreement is just. To say that a practice or agreement
is just in this context is to say that all the parties accept it as just and do so freely
and with knowledge of the pertinent facts. The agreement is stable if the parties
over time continue to accept it as just.
Operationally, the development of an international business ethics involves as
well the development of a background of accepted customs, laws, and institu?
tions on the international level. In a developed society ethics functions against
such a background. On the international level this background is insufficiently
developed, though arguably even more important. Without it, international ethi?
cal norms must do more work but yet paradoxically are less clear. The UN and
a variety of church-related groups have proposed codes of conduct for multina?
tionals. These are a start. Multinationals whose interest is at stake should have a
voice in the development of such codes; but clearly they should not have the only
voice, since they are not the only ones affected. Governments, international
groups and bodies, and interested individuals are also appropriate sources to be
tapped.
International rules and guidelines are necessary in order to protect those un?
able adequately to protect themselves, given disparities of power among nations,
and in order to keep competition fair. Clearly guidelines and rules are most
urgent in those areas in which the harm being done is most serious. The devel?
opment of international guidelines for the sale of infant formula is an example
of a guideline that was developed in response to what many critics felt was a
pressing need. A political fact of international as of national life is that those
issues which have the most vocal champions tend to get the greatest attention,
even if the ills to be addressed are not the most pressing.
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The need to keep competition fair presupposes a competitive international
environment. A complaint from many American multinationals in response to the
Foreign Corrupt Practices Act which precluded the paying of bribes by Ameri-
can-controlled companies was that it put them at a competitive disadvantage
vis-a-vis multinationals from European or Japanese companies which were not
constrained by their parent-country laws to act similarly.10 The argument raised
by American corporations was not that bribery was ethical in some parts of the
world, but that it was practiced in some parts of the world and was the only
effective way to do business in those areas. From a utilitarian perspective they
argue that harm is done American business because it cannot compete in certain
areas while the envisaged good is never achieved; harm done from bribery is not
prevented because others engage in it. This is not an adequate ethical defense;
but it does raise a legitimate concern. In actual fact since 1977 when the Act was
passed, statistics fail to show that American companies have been seriously harmed.11 They seem to be able to compete despite not being allowed to pay
bribes. But if one's competitors are allowed to engage in practices that give them
a competitive advantage, then the disadvantaged business has some ground for
complaint. The optimal solution consists not in allowing the firms of all countries to
engage in bribery, but in precluding the firms of all countries from so acting. This may be done in a variety of ways. The neatest is by international agreement and agreed upon guidelines. In the absence of such guidelines multinational
agreements can be effective. If all the producers of airplanes agreed among themselves that they would not pay bribes, then those countries that demanded
bribes would be forced to change their way of doing business or go without
airplanes.
Important to notice in this discussion is the claim that demanding or paying bribes is unethical. But no country openly justifies such payments as ethical, and
if some country openly requires such payments they are no longer bribes but are
part of the cost of doing business in that country which every supplier must pay to operate there. There is a difference between a practice being ethical and its
being a common practice. If there actually is a disagreement about whether a
practice is ethical or not, then that demands discussion and, if ethically possible,
compromise rather than unilateral action.
The international legitimate drug industry also exemplifies the need for inter?
national norms. U.S. drug manufacturers are restricted by U.S. law from selling certain drugs and from making others available without a prescription. Are they
ethically allowed to sell those drugs abroad if the local laws do not prohibit their
doing so? To answer in the negative is to make U.S. regulations ethically build?
ing universally. But that is more than the regulators claim to do when imposing their regulations. Great Britain, Germany, and other advanced industrial nations
have regulations that differ in many ways from those adopted by the U.S. There
is no reason to believe that any one country's set of regulations are ethically
mandatory. Some less developed countries that do not have the money to monitor
and test the many new and old drugs available have simply adopted U.S. stand?
ards. Where this is the case, for a drug company to try to circumvent the intent
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of those countries by marketing possibly harmful drugs that technically are not
captured by their rules is clearly unethical. But it would not be unethical for U.S.
drug companies to market drugs that are not marketable in the U.S. if there were
good reason to do so in countries that allowed the sale of those drugs.12 If there
were international standards, the drug companies would have clear guidelines and at least many of the possible ethical difficulties could be avoided.
Ethical issues that involve more than one country are the most obvious candi-
dates for agreement and negotiation. Pollution is a prime example of an issue
that is not only national but also international. As such it is an obvious candidate
for such international negotiation and is one on which a good many countries
already have bilateral and multilateral agreements. The agreements are usually
legal in nature; but there is no reason why there cannot be negotiation on the
ethically permissible levels of pollution, with legal negotiations solving the
problem of how to achieve that level. The depletion ofthe ozone level is an issue
of great concern globally and clearly an ethical issue because of the threatened
serious harm. International guidelines are necessary, since no one country is
responsible for or can alone remedy the situation. Other areas include the treat?
ment and rights of migrant workers across borders, international unions, the
dumping of goods by one country in another, questions of trade barriers and free
trade, the possible international trade in human organs and tissues, and similar
issues. These are pressing and form the topic of international negotiation. But
they all have a clearly ethical dimension that deserves more open discussion.
Agreement about justice and fairness on such issues will both set the stage and
provide some of the background institutions necessary for a truly international
ethics of business to develop, be recognized, and hence provide guidelines that
can be invoked and form the basis for moral pressure to be applied to those who
violate them.
Business ethics is still a young field, and its international dimensions have
scarcely been raised, much less adequately addressed. They cannot be satisfac-
torily addressed unilaterally by any one nation or national group. A necessary
first step is greater articulation of the many divergent perspectives that must be
reconciled. The six papers that follow make a start in this direction and represent
views from seven different countries: Russia, Mexico, the United States, Eng?
land, South Africa, Japan, and the Netherlands.
In the first, Alexander Filatov, a Russian professor of economics and one of
the emerging Russian entrepreneurs, argues that the existing economic struc?
tures in Russia today are fundamentally unethical and are skewed in favor of
state enterprises. Within such a context, those who wish to engage in business as
individual entrepreneurs have no alternatives but to act in a way that in many
other countries would be considered unethical?and in fact may be unethical.
For instance, given the unfair system for allocating goods, bribery is necessary.
While multinationals may of course choose not to locate in such an environment,
Russians who wish to start a business in contemporary Russia cannot operate
without paying bribes. Small entrepreneurs are not the ones who initiate the
bribes or establish the system; they simply operate within a pre-existing, eco?
nomically distorted, and unethically structured system. Would it be better for
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them or for Russia if they did not develop private enterprises given the system
and the unethical practices it involves? Whatever moral assessment one makes
of the situation, the claims of Filatov must be taken seriously.
Bryan Husted, writing from Mexico, presents a transaction-cost interpretation
of corruption in less developed countries. The perspective he develops is not a
moralistic approach typical of the treatment of bribery in the United States or of
bribery by American companies. His article ends with some suggestions to
which his analysis leads with respect to policy making, and it also suggests some
empirical research that the analysis suggests. In the latter way the paper serves
as an important reminder that international business ethics, just like business
ethics on the national level, must be informed by a good deal of empirical
research if it is to prove useful.
The article by Karen Paul, Simon Pak, and John Zdanowicz of the United
States and Peter Curwan of England, provides just such empirical research. It is
not a paper in normative ethics. Rather it presents a concrete tool for helping
identify possible legal and ethical breaches in international transactions. It help-
fully shows how governments might track violations of their laws and regula?
tions, and it also suggests how those who take part in international transactions
can tell what a fair market price is for many goods. The same technique can be
used by a multinational to determine what the price of an "arms-length transac?
tion" would be for goods produced in another country by its own subsidiary, and
for third parties to monitor that price. Business ethics in the United States is
often abstract and normative; more is being written that is directly applicable in
implementing norms, and this article exemplifies that important and still under-
developed aspect of business ethics.
How ethics operates in corrupt environments?or how it fails to operate therein?is an important theme that has received too little attention. Yet it is
central to any discussion of international business ethics, since so many coun?
tries of the world suffer from corruption of various types. The contribution by G. J. Rossouw, who writes from South Africa, describes business ethics in devel?
oping countries. Professor Rossouw's analysis takes us one step beyond the
situation in Russia. But he argues, in a way somewhat similar to Filatov, that
certain preconditions have to be met before business ethics can flourish.
The fifth paper, by Iwao Taka, concerns not a developing country but one of
the leading industrial countries of the world. The view of ethics that informs
business decisions in Japan is not one that grows out of the Christian tradition
or out of Western ethical theory. Understanding how Japanese make ethical
decisions requires understanding the ethical framework and beliefs within which
those decisions are made. The Japanese approach to ethics, and so to business
ethics, is different from the American. This underlines the fact that international
business ethics cannot be developed from any single national perspective or
view of ethics. Taka's article presents a Japanese view of business ethics. He
explains and develops the normative context in which Japanese business oper? ates. The difference between the Japanese approach to issues and the American
approach become evident as he explains the importance ofthe group, the ties that
bind firms within a "family," and the long-term commitments of one firm to
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another that seem from the American perspective to lead to unfair treatment of
American firms by restricting competition and closing markets. The difference
between the American and the Japanese perspective of what constitutes fair trade
practices is a continuing issue of negotiation between the two countries. Only by each side's appreciating the other's point of view and value system is negotiation
likely to lead to acceptable and stable practices. Henk van Luijk, a professor at the Netherlands Business School and one ofthe
founders of the European Business Ethics Network, appropriately represents the
continental European approach to business ethics. Although many of the issues
that business faces in Western Europe resemble those in the United States, the
cultural heritage and social structures of the two diverge to some extent. While
American approaches to business ethics are typically focused on particular cases
or issues, much of the work in Western Europe has taken a broader and more
theoretical approach to business ethics. Professor van Luijk goes beyond what
he calls "recognitional ethics" to call attention for the need to attend to transac?
tional ethics and market morality and to participatory ethics, which he adum-
brates with respect to civil society, a term well-known and developed in the
Continental philosophical and socio-economic literature, but little used in the
American context.
The set of papers illustrates that business ethics on the international level
requires not only a unilateral discussion of how American or other multination?
als should operate abroad, but also the development of a broad set of guidelines and agreements that can be accepted by all those affected, no matter what the set
of ethical beliefs from which they operate. If this is true, then a workable set of
such background institutions is more valuable and more likely to be achieved
than is agreement on an overarching set of ethical norms or principles upon which all people from all nations must agree. International business ethics would
then have as its primary object not an international ethical theory, but the devel?
opment and promotion of a set of international practices that all can agree to as
ethical, no matter what ethical perspective they hold. This too, however, is a goal
and an ideal, and it is a goal and ideal that will require a great deal of work?
empirical and normative, individual and collaborative.
Notes
1 What I am calling the American approach to business ethics can be found in the American
textbooks on business ethics, in the discussions of business ethics in the media, and in many of the ethical codes adopted by American corporations. 2 Although business ethics as an academic subject started first in the United States, it is
well established in Europe and has taken hold in Australia, Brazil, Hong Kong, and Japan,
among other countries. As people in these countries started using the American texts and
other materials they saw the need for developing their own materials. For more on this issue
see, for example, Jack Mahoney, Teaching Business Ethics in the UK, Europe and the USA:
A Comparative Study, London: The Athlone Press, 1990; and the journal, Business Ethics:
A European Review.
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3Two books by Americans that deal with international business ethics and attempt to map out some of the issues are: Richard T. De George, Competing With Integrity in International
Business, New York: Oxford University Press, 1993; and Thomas Donaldson, The Ethics of International Business, New York: Oxford University Press, 1989. In addition there have
been a number of conferences dealing with issues in international business. See, for example, Ethics and the Multinational Enterprise, ed. by W. M. Hoffman, A. E. Lange, and D. A. Fedo, Lanham: University Press of America, 1986.
4For two accounts see Carl A. Kotchian, "The Payoff: Lockheed's 70-Day Mission to
Tokyo," Saturday Review, July 9, 1977, pp. 7-16; and Robert Shaplen, "Annals of Crime:
The Lockheed Incident," New Yorker, 53 (January 23 and 30, 1978).
5One of the early books castigating American multinationals was Richard J. Bamet and
Ronald E. Muller, Global Reach, New York: Simon & Schuster, 1974. See also, among others, Pierre Jalee, The Pillage ofthe Third World, New York: Modern Reader Paperbacks, 1968.
6For an account of apartheid in South Africa, and for a list of the Sullivan Principles, see
Oliver F. Williams, The Apartheid Crisis: How We Can Do Justice in a Land of Violence, San Francisco: Harper & Row, 1986.
7Among the book-length studies of the disaster see Larry Everest, Behind the Poison
Cloud: Union Carbide's Bhopal Massacre, Chicago: Banner Press, 1985; and Paul Shrivas-
tava, Bhopal: Anatomy of a Crisis, Cambridge, MA: Ballinger Publishing, 1987.
?See, for example, Richard T. De George, Business Ethics, 3rd ed., New York: Macmillan, 1990.
9Most of the American texts in the field do not call into question the justifiability of the American system of capitalism, which they take for granted.
10For a discussion of the Act and the 1988 Amendments, see Bartley A. Brennan, "The
Foreign Corrupt Practices Act Amendments of 1988: 'Death' of a Law," North Carolina
Journal of International Law and Commercial Regulation, 15 (1990), pp. 229-47; and Bill
Shaw, "Foreign Corrupt Practices Act Amendment of 1988," Maryland Journal of Interna?
tional Law and Trade, 14 (1990), pp. 161-74.
nU.S. General Accounting Office, Report to the Congress: "The Impact of the FCPA on U.S. Business," March 4, 1981; Paul J. Beck, Michael W. Maher, Adrian E. Tschoegl, "The
Impact of the Foreign Corrupt Practices Act on U.S. Exports," Managerial and Decision
Economics, 12 (August 1991), pp. 295-303.
lzFor a development of the argument supporting this claim, see De George, Business
Ethics, Chapter 19.
)1994. Business Ethics Quarterly, Volume 4, Issue 1. ISSN 1052-150X. 0001-0009.
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