HBC 2234: INTERNATIONAL BUSINESS MANAGEMENT

TOPIC: ETHICS AND INTERNATIONAL BUSINESS

MANAGEMENT
KIWI GROUP

GROUP MEMBERS:
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TABLE OF CONTENTS

DERRICK MUTIE
ESTHER MUGASIA
MCINTYER NDUTA
KUNGU NDIRANGU
PENINNAH GITAU
TEDDY OMONDI

TITLE

PAGE

INTRODUCTION2
DEFINITION OF ETHICS...3, 4
SOURCES OF ETHICS.....5, 6
THEORIES OF ETHICS7, 8
TYPES OF UNETHICAL BEHAVIOR9, 10
HOW TO SOLVE UNETHICAL BEHAVIOUR..11, 12
APPROACHES IN INTERNATIONAL BUSINESS ETHICS..13, 14
IMPORTANCE OF INTERNATIONAL BUSINESS ETHICS..15, 16

CONCLUSION...17
REFERENCES18, 19

INTRODUCTION

Ethics can be described as Well-founded standards of rights and wrong which prescribe what

human being ought to do in terms of right obligation, benefits to society fairness or specific
virtues. The purpose of this document is to discuss the topic Ethics in International Business
Management. This topic has been broken down into six sub-topics which are; Definition of
Ethics, Sources of Ethics, Theories of Ethics, Types of Unethical Behavior, how To Solve
Unethical Behavior and Types of Ethical Behavior.

DEINATION OF ETHICS
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ETHICS
Well founded standards of rights and wrong which prescribe what human being ought to do in
terms of right obligation, benefits to society fairness or specific virtues.
International business ethics is a particularly complex issue as ethical standards are different
depending on where you are. Corporate governance, bribery, corruption, working conditions and
targeted marketing are all issues that require organizations to establish an ethical standpoint from
which they can work on.
Standards that impose responsible obligation to refrain from unethical behavior. Ethic relate to
life for example right to life, freedom, privacy etc.
In general ethics is a moral philosophy where a person makes a specific moral choice and sticks
to it.
Business Ethics
Are a key factor in responsible decision making. Maintaining a high ethical standpoint when
operating your business can provide benefits to both the internal and external stakeholders of
your business.
Business ethics is the study of business situations, activities, and decisions where issues of right
and wrong are addressed.

Business ethics (also corporate ethics) is a form of applied ethics or professional ethics that
examines ethical principles and moral or ethical problems that arise in a business environment. It
applies to all aspects of business conduct and is relevant to the conduct of individuals and entire
organizations.
Ethic in society
Study and development on ones ethical standards. Continuous effort of studying our own moral
beliefs and moral standards and ensuring that we help shape and live up to these standards.
www.wikipidea.com

SOURCES OF ETHICS
Primarily ethics in business is affected by three sources;Culture.
Religion.
Laws of the state.

Religion
It is one of the oldest foundations of ethical standards. Religion wields varying influences across
various sects of people. It is believed that ethics is a manifestation of the divine and so it draws a
line between the good and the bad in the society. Depending upon the degree of religious
influence we have different sects of people; we have sects, those who are referred to as orthodox
or fundamentalists and those who are called as moderates. Needless to mention, religion exerts
itself to a greater degree among the orthodox and to lesser extent in case of moderates.
Fundamentally however all the religions operate on the principle of reciprocity towards ones
fellow beings!
Culture
Culture is a pattern of behaviors and values that are transferred from one generation to another,
those that are considered as ideal or within the acceptable limits. No wonder therefore that it is
the culture that predominantly determines what is wrong and what is right. It is the culture that
defines certain behavior as acceptable and others as unacceptable.

Human civilization in fact has passed through various cultures, wherein the moral code was
redrafted depending upon the epoch that was. What was immoral or unacceptable in certain
culture became acceptable later on and vice versa.
During the early years of human development where ones who were the strongest were the ones
who survived! Violence, hostility and ferocity were thus the acceptable. Approximately 10,000
year ago when human civilization entered the settlement phase, hard work, patience and peace
were seen as virtues and the earlier ones were considered otherwise. These values are still pt in
practice by the managers of today!
Still further, when human civilization witnessed the industrial revolution, the ethics of agrarian
economy was replaced by the law pertaining to technology, property rights etc. Ever since a
tussle has ensued between the values of the agrarian and the industrial economy!
Law
Laws are procedures and code of conduct that are laid down by the legal system of the state.
They are meant to guide human behavior within the social fabric. The major problem with the
law is that all the ethical expectations cannot be covered by the law and specially with ever
changing outer environment the law keeps on changing but often fails to keep pace. In business,
complying with the rule of law is taken as ethical behavior, but organizations often break laws by
evading taxes, compromising on quality, service norms etc
Sourabh, A- http://managementstudyguide.com/
http://www.managementstudyguide.com/workplace-ethics.htm

THEORIES OF ETHICS
Compassion and Consequence
Theories of ethics based on abstract moral principles have been criticized by some thinkers for
neglecting the question of human compassion. No business based solely on compassion could
succeed financially, but that doesn't mean compassion should never be a factor in ethical
decision-making. A doctor who sees a needy patient without charging for services or a business
owner who hires a troubled teenager to give him a second chance could be seen as acting with
compassion. Another way to look at ethical problems is to think about the potential consequences
of a particular course of action. Business practices that create environmental problems might
bring an immediate benefit for stockholders, but with serious long-term consequences.
Virtue and Vice
Virtue ethics is an ancient ethical theory that has made a comeback in recent years. A practitioner
of virtue ethics tries to act so as to embody certain virtues such as honesty or courage, while
avoiding vices such as dishonesty or cowardice. In real-world decision-making, no ethical theory
is sufficient for all situations. The best approach is to examine each situation according to all the
major ethical theories. For instance, before making a major decision, a business leader could ask
himself several questions about his planned course of action. Is it in the best interests of the
company? Does it fulfill the duty to act in the interests of investors or stockholders? What is the
likely impact on the community, employees and the environment? Any decision made after
thoughtfully considering these questions is likely to be an ethical one.

Self-Interest, Enlightened or Otherwise

Strong believers in laissez-faire capitalism often argue that business decisions should be made
solely on the basis of self-interest to the extent allowed by the law. In most personal interactions,
this type of behavior would be seen as unethical, but champions of free market economics argue
that self-interested behavior produces wealth and creates new jobs. Because a business leader has
no way of knowing which altruistic actions would most benefit society as a whole, the best way
he can contribute to society is by doing whatever benefits his own business. This theory of
business ethics could be used to justify nearly any business decision. However, enlightened selfinterest is a variation of the theory based on the idea that self-interest can lead to the same
decisions as altruism in some circumstances. For instance, a business owner who implements a
sustainability program may save money by reducing expenses.
Duty to Principles or People
A pure free market economy is a hypothetical concept, as real markets are always subject to
regulations and restrictions. Most business ethics theorists accept the idea that a business leader
may have some ethical obligations beyond self-interest. However, much debate exists about who
or what the business leader might be obligated to. If a company has investors or stockholders, the
business owner has a legal duty to act in their financial interest. Some would argue that he also
has an ethical duty to operate in the best interests of the community, the environment, his
employees or other stakeholders. Some business leaders consider themselves to have a personal
duty to uphold moral principles they believe in, such as religious teachings.
Thompson, S- http://smallbusiness.chron.com/ethical-theories-business-74122.html

TYPES OF UNETHICAL BEHAVIOR

Misrepresentation
Corporate misrepresentation can take many forms. It can be as simple as a salesman who lies
about his company's products, or it can be false or misleading advertising. Misrepresentation can
involve a cover-up of illegal workplace conditions or transactions; falsified data in a shareholder
report; lying to a union about corporate profits; or hiding or denying safety problems with a
product. Other examples include corporate board members with conflict of interests, doctors who
push the most expensive drugs rather than the most effective ones, and brokers who recommend
stocks that they own in an effort to drive up the price.
Financial Misconduct
Examples of financial misconduct include price-fixing, or an illegal agreement between industry
competitors to "fix" the price of a product at an artificially inflated level; physicians who refuse
to treat non-insured patients, or perform unnecessary procedures to make more money; tax
evasion; tax fraud; and "cooking the books" to make the company look more profitable than it is.
Other possibilities include paying unjustifiable salaries and bonuses to top officials regardless of
work performance -- sometimes in spite of it -- and chasing short-term profit by placing
investor's money in questionable investments.
Mistreating Employees
Many examples exist of unethical corporate conduct toward employees or other workers in the
supply chain. Many U.S. corporations used third- World sweatshops to produce their goods;
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some have even been found to use child labor. Every year, lawsuits are filed against employers
who are accused of sexual harassment or discrimination against their employees. Some
employers have been sued for threatening or firing whistle-blowers, or employees who point out
illegal practices or safety violations in the workplace. Some U.S. businesses use undocumented
workers because they can pay them less than minimum wage.
Bending the Rules
Bending the rules in a business situation is often the result of a psychological stimulus. If an
employee is asked to perform an unethical task by a supervisor or manager, he may do it because
his allegiance to authority is greater than his need to abide by the rules. Turning the other way to
avoid trouble for another employee is still unethical, even though the motivation may be
empathetic. For example, knowing that a coworker is having issues outside work justifies
watching him leave early each day without reporting it. Withholding information that can change
an outcome also falls under the umbrella of unethical behavior, even if the perpetrator believes
he is doing what is in the best interest of the business. For example, if a poor earnings report is
withheld until after a stockholder meeting.
Environmental
Unethical behavior by companies, such as releasing pollutants into the air, can affect cities,
towns, waterways and masses of people. Though accidents can occur, the release of harmful
toxins into the environment due to lax safety standards, improper maintenance of equipment or
other preventable reasons is unethical. If a business willingly continues production of a product
knowing inherent environmental risks exist, it can certainly be categorized as unethical behavior.

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Strain, M- http://smallbusiness.chron.com/3-types-unethical-behavior-business-21878.html

HOW TO SOLVE UNETHICAL BEHAVIOR

Multinationals should respect the human rights of their employees as this will reduce
exploitation of workers.
Multinational corporations should always pay their fair share of taxes as lack of paying taxes is
considered unethical.
Multinationals should respect the local culture and work with it not against it. Rather than simply
transferring their home country ways into the host country, MNEs should consider changes in
operating procedure, plant planning etc. which take into account local needs and customs.
They should also practice participation not paternalism. This helps learning about needs of
stakeholders rather than deciding what is best for them. When needs and requirements of
stakeholders are taken into consideration, ethical dilemmas can be easily resolved.
Creating a code of conduct is another solution. A written code of conduct provides employees
and managers in a multinational agency with an overview of the type of conduct and behavior a
company expects. It outlines what behaviors are unacceptable and what measures are taken if an
employee violates the code of conduct.
Reinforce consequences. Multinational managers and owners must hold their employees
accountable when they act unethically. Start by informing new employees of the rules during
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their orientation session. If an employee acts unethically, refer to the code of conduct and take
the necessary measures to warn or terminate.
Hire for values. This is another way for solving unethical problems. MNEs seek on to bring
individuals who have the education and experience that prove they are skilled workers.
Employers should also look at candidates values to ensure they mesh with the companys culture
to prevent unethical behavior.
Frederick Reamer & Sr.Ann Patrick Conrad in Professional Choices:Ethics at Work(1995).
Langford,D.(1999) business computer ethics
John William(1970)systematic study of international business ethics

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APPROACHES IN INTERNATIONAL BUSINESS ETHICS

Doing business transnationally raises a number of issues that have no analogue in business
dealings done within a single country or legal jurisdiction. International business ethics seeks to
address those issues.
One common approach in international business ethics is to refer to or to construct lists of
norms that ought to guide transnational business conduct. Thus, for example, the United
Nations' Universal Declaration of Human Rights or, more recently, the United
Nations Global Compact, is advanced as a guide to conduct. The UN Global
Compact enjoins business firms to support and respect internationally recognized human
rights, avoid complicity in human rights abuses, uphold freedom of association and
collective bargaining, eliminate forced and compulsory labor, eliminate child labor,
eliminate all forms of discrimination in employment, support a precautionary approach to
environmental challenges, promote greater environmental responsibility, encourage the
development of environmentally friendly technologies, and work against corruption in all
its forms, including extortion and bribery.

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Alternatively, whether inspired by something like the UN Global Compact, a preferred

moral theory, a preferred theory of justice, or some combination of these or other factors,
other lists of norms are proposed as guides to the ethical practice of transnational
business. DeGeorge (1993), for example, advances seven guidelines for the conduct of
multinational firms doing business in less developed countries. These guidelines call for;
The avoiding harm
Doing good
Respecting human rights
Respecting the local culture
Cooperating with just governments and institutions
Accepting ethical responsibility for one's actions
Making hazardous plants and technologies safe.
Among other uses, Donaldson and Dunfee (1999) see the hypothetical, macro social contract in
ISCT providing an ideal framework for adjudicating questions of transnational business conduct.
Criticism
The main conversation in academic business ethics is focused on the large, publicly traded
corporation. It owes its prescriptions mainly to normative political philosophy, rather than moral
theory. It speaks more to public policy toward business (and especially the large, publicly traded

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corporation) and the institutions of capitalism than it does to ethical business conduct, i.e., what
one ought to be doing when one is doing business.

IMPORTANCE OF INTERNATIONAL BUSINESS ETHICS

Primarily it is the individual, the consumer, the employee or the human social unit of the society
who benefits from ethics. In addition ethics is important because of the following:
Satisfying Basic Human Needs: Being fair, honest and ethical is one the basic human
needs. Every employee desires to be such himself and to work for an organization that is
fair and ethical in its practices.
Creating Credibility: An organization that is believed to be driven by moral values is
respected in the society even by those who may have no information about the working
and the businesses or an organization. Infosys, for example is perceived as an
organization for good corporate governance and social responsibility initiatives. This
perception is held far and wide even by those who do not even know what business the
organization is into.
Uniting People and Leadership: An organization driven by values is revered by its
employees also. They are the common thread that brings the employees and the decision

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makers on a common platform. This goes a long way in aligning behaviors within the
organization towards achievement of one common goal or mission.
Improving Decision Making: A mans destiny is the sum total of all the decisions that
he/she takes in course of his life. The same holds true for organizations. Decisions are
driven by values. For example an organization that does not value competition will be
fierce in its operations aiming to wipe out its competitors and establish a monopoly in the
market.
Long Term Gains: Organizations guided by ethics and values are profitable in the long
run, though in the short run they may seem to lose money. Tata group, one of the largest
business conglomerates in India was seen on the verge of decline at the beginning of
1990s, which soon turned out to be otherwise. The same companys Tata NANO car was
predicted as a failure, and failed to do well but the same is picking up fast now.
Securing the Society: Often ethics succeeds law in safeguarding the society. The law
machinery is often found acting as a mute spectator, unable to save the society and the
environment. Technology, for example is growing at such a fast pace that the by the time
law comes up with a regulation we have a newer technology with new threats replacing
the older one. Lawyers and public interest litigations may not help a great deal but ethics
can.
Ethics tries to create a sense of right and wrong in the organizations and often when the law fails,
it is the ethics that may stop organizations from harming the society or environment.

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Entrepreneur; Liar, Liar; Joshua Kurlantzick; October 2003 "Graziadio Business Review";
Creating and Sustaining an Ethical Workplace Culture; Charles D. Kerns; 2003 Harvard Business
School; The Importance of 'Don't' in Inducing Ethical Employee Behvior; Carmen Nobel;
February 2011 Business Management Daily; Encourage Ethical Behavior as Economy Recovers;
Patricia J (REFERENCES FOR BOTH IMPORTANCE OF INTERNATIONAL BUSINESS
ETHICS AND APPROACHES IN INTERNATIONAL BUSINESS ETHICS)

Criticism
The main conversation in academic business ethics is focused on the large, publicly traded
corporation. It owes its prescriptions mainly to normative political philosophy, rather than moral
theory. It speaks more to public policy toward business (and especially the large, publicly traded
corporation) and the institutions of capitalism than it does to ethical business conduct, i.e., what
one ought to be doing when one is doingCONCLUSION
Ethics tries to create a sense of right and wrong in the organizations and often when the law fails,
it is the ethics that may stop organizations from harming the society or environment. Ethics are
very important in international business. They cant be ignored. The topics in this document
define Ethics, their importance, various examples, sources of ethics and various solutions to

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unethical behavior. This document contains comprehensive study of ethics and it will help one
understand what Business Ethics is all about.

REFERENCES
Sourabh, A- http://managementstudyguide.com/
http://www.managementstudyguide.com/workplace-ethics.htm

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http://www.managementstudyguide.com/sources-of-business-ethics.htm
Thompson, S- http://smallbusiness.chron.com/ethical-theories-business-74122.html
Strain, M- http://smallbusiness.chron.com/3-types-unethical-behavior-business-21878.html
Phillips, C- http://smallbusiness.chron.com/kinds-unethical-behavior-business-20479.html
Stanford Encyclopedia of Philosophy is copyright 2014 by The Metaphysics Research The
Lab, Center for the Study of Language and Information (CSLI), Stanford University
Library of Congress Catalog Data: ISSN 1095-50
www.Management study guide 2013
Entrepreneur; Liar, Liar; Joshua Kurlantzick; October 2003 "Graziadio Business Review";
Creating and Sustaining an Ethical Workplace Culture; Charles D. Kerns; 2003 Harvard
Business School; The Importance of 'Don't' in Inducing Ethical Employee Behvior;
Carmen Nobel; February 2011 Business Management Daily; Encourage Ethical Behavior
as Economy Recovers; Patricia J
1.Frederick Reamer & Sr.Ann Patrick Conrad in Professional Choices:Ethics at Work(1995).
2.Langford,D.(1999) business computer ethics na 3. John William(1970)systematic study
of international business ethics
www.wikipidea.com

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