Chapter 1 (Why Ethics Matter) - Copyright 2009 World Trade Press All rights reserved May not be reproduced in any form without permission from the

1 CHAP TER 1 Why Ethics Matter T HE MORE ONE KNOWS ETHICS , THE MORE IT IS USED AND THE MORE USEFUL IT BECOMES . – P LATO D E B A T E S A B O U T I N T E R N A T I O N A L B U S I N E S S E T H I C S are as old as international business itself. In past decades, business ethics was predominately a subject taught at business schools and debated by academics. It had little impact in the international business world, where the prevailing attitude was that anything goes and everyone is paid to cut a deal. Many governments (including France, Japan and Germany), recognizing the reality of doing business in certain parts of the world, actually allowed businesses until fairly recently to write off overseas bribe payments as expenses on their corporate income tax. Ethical Challenges Everywhere Every executive, regardless of his or her geographic location, every corporate board, regardless of where it sits, has at some point faced a decision that challenges their ethical standards. The course of action taken often does not quite pass muster with basic ethical standards. In other words, it “smells.” A European manufacturing company trying to break into the Asian market is asked to “donate” to a charitable foundation run by the brother of a high government official. A German drug company offers government health officials from developing countries lavish entertainment as an inducement to buy its drugs. A local government hoping to have its city become a venue for the Olympics arranges for the local university to provide entrance for offspring of selection committee members. A US Internet company sells information gleaned about its customers’ online habits without their consent or even their knowledge. In each case, the company’s managers can reasonably argue that they are pursuing the interests of shareholders in a lawful manner. A decade ago, not breaking the law may have been enough. Today, however, the global business playing field is changing. The pressure to act ethically, to act as a good corporate citizen of the world, is growing in both developed and developing nations. For example: One-third of UK consumers claim to be seriously concerned about ethical issues when shopping—although only half of that number put their principles into action and buy (or boycott) products because of the manufacturer’s reputation. The MORI research firm, commissioned by Britain’s Co-operative Bank, found one-in-four consumers claim to have investigated a company’s social responsibility at least once: one-in-two shoppers say they have bought a product and recommended a supplier because of its socially responsible reputation. The report shows a heightened awareness of ethical issues among the UK public and a boom in the market for ethically-oriented products and services. The ethical consumer market, which encompasses a whole range of products from stock Copyright © 2009. World Trade Press. All rights reserved. May not be reproduced in any form without permission from the publisher, except fair uses permitted under U.S. or