Is ethical conduct in international business an unfashionable notion or an imperative?

09/06/2015

Ethical conduct in international business

Ethical conduct in international businessIt’s not uncommon for people of a certain age (Wow, somehow I got here, and it happened F-A-S-T!!) to marvel at the latest technology, and within a heartbeat, sigh wistfully – can you picture it? – at the memories of better days gone by: better music, better movies, better food, just…better.

OK, that’s probably not objectively true, and I do exaggerate a bit to make a point – not because I am a particularly nostalgic sort, but to position the key idea of this article.

The ‘old-fashioned’ notion of ethical conduct in international business, and doing what’s right (for its own sake, can you believe it??!) has somehow gotten terribly lost, and risks being lost even more strikingly when businesses of all sizes and businesspeople of all levels venture into international markets.

That statement may sound a bit North America-centric, but the ‘loss’ can happen from many points of view, and from many markets to many other markets.

The geography of international business ethics

The concept of ethical behaviour is not exclusive to one or even a few ‘worldviews’, though its exact nature can vary significantly.

Need an example or two? Canada, the U.S. and Europe (among others) place great value on protecting intellectual property, based on a combination of commercial considerations and a sense of ‘rightness’ about doing so. This can pose a challenge when dealing in markets where the failure to protect trade secrets or IP are seen as weaknesses to be exploited.

Would a Canadian, American or European company lose its ethical worldview, or compass, when establishing a local presence in such markets? Let’s just say there have been numerous examples of this has happening, to the indignation of the home-based press and the chagrin of shareholders awaiting the impact of having been caught.

On the “other side of the coin”, I had a memorable and striking conversation with a Saudi-based banker while at a meeting in Ankara a couple of years ago. This gentleman expressed genuine dismay at the fact that bankers and investment financiers are seen as ‘kings of the world’ in some markets.

He and his colleagues felt (is there a flavour of ethical thought and conduct here?) that farmers who feed human beings and others who create value and improve life deserved greater recognition for their efforts.

Bankers, he argued gently but persuasively, ought to be reminded that they are, in reality, facilitators of far more important activity than their own.  Could such an ethical compass face the risk of losing its reference point in a major financial market?

Following your ethical “True North”

At home, or in similar environments, familiar reference points and a trusted internal compass can combine to at least hint at the position of “True North”, offering perhaps just enough of a glimpse of ‘the right thing to do’, in most scenarios likely to be encountered.

Operating in international markets, it can be surprising to find that the trusted compass has been demagnetized by the combined influences of local practice, cultural and social differences in what are deemed ‘acceptable’ behaviours, and a conscious (or unconscious) choice to let those influences override that compass.

Even a subtle shift can allow the seed of a disastrous decision to be planted: the illusory comfort of pleading alignment with local practices, even as a competitive countermeasure, offers little protection when the ‘wrong’ is ultimately subjected to the bright light of scrutiny.

Know which way your compass points ahead of time

I was invited for a drink some years back by a gentleman who was introduced through a mutual contact in London.

The purpose of the meeting (over some of the best fruit juice I have ever tasted, incidentally) was to propose an engagement where I would be linked to this chap’s client as an independent and trusted third party, to offer an objective opinion about a decision that might involve my host’s firm as a service provider. Not an uncommon request, and under the right conditions, quite workable.

The discussion evolved well until about the last bit of juice in the tall frosty glass. At that moment, a sentence began about ‘certain ways things are done in this part of the world…’ – can you hear the alarm bells going off?

The proposal was that my recommendation to the ultimate client should be crafted to lead to the selection of the firm whose senior local representative had so courteously extended an invitation to meet. Well, so much for a promising and potentially interesting assignment!!

I put a polite but firm end to the discussion, on the basis that we do not do business in this way, and in any event, it would be illegal (with serious consequences) for a Canadian firm to be engaged in such practices.

The question of ethical conduct is not a theoretical one. Any business with decent levels of international activity, no matter how small, will inevitably run into gray areas at minimum and dangerously serious illegal propositions at worst.

One way to address this likelihood is to make decisions ahead of time about how your business (and your individual leaders or executives) will deal with the situation when it arises. If in doubt, seek the advice of your closest Embassy, High Commission or Post: you will get the right advice!

Taking a stand for another kind of ethical worldview

Is this really a discussion about ‘going old school’? Were past generations truly more ethical, or are we so well and so instantaneously informed today, that we are simply more aware of the massive transgressions (long list of examples and related adjectives deleted!) that have done decades or more worth of damage?

If it truly is a case of greater visibility, are we simply on a collective “trip” to one or the other end of the spectrum of ethical conduct, and can we as individuals and businesses make a difference in what the destination looks like?

I firmly believe the answer is “Yes”.

In some contexts, the ability to apply superior financial resources to win a contract, to gain access to influential parties, or to put a competitor out of commission is seen as nothing more than good business.

The nuances here are reflected in the fact that even institutions advocating anti-corruption measures had, for a time, to recognize the notion of a ‘facilitation payment’ as a relatively legitimate disbursement of funds, to be distinguished from a ‘bribe’.

Can an ethically-grounded position withstand the pressure of competition, and the subtle nudge to ‘adapt’ to local practices, especially after a material investment of time, resources and finances to enter a particular market?

Sometimes, the answer will simply be “No, it cannot”, and this is where a reminder can be helpful: this is a commercial decision with potential consequences that extend far beyond the commercial context to nothing less than life and death, especially in global supply chains so often anchored in developing markets.

Overheard once, a remark by a serial international entrepreneur: “Darn (OK, that’s not exactly the expression used – paraphrase, not quote!), I lost the deal to license this market by bribing the wrong official, AND not bribing him enough!”

Short-term financial gain at the expense of irreparable damage to a personal or company brand?

If the pure issue of ethical standards and conduct is not sufficiently compelling, perhaps a consideration of the economic consequences of following a demagnetized compass will motivate an alternate choice.

Standing at the crossroads and choosing our direction

It appears that we are, in several contexts from fair trade to anti-corruption measures, at a stage in our collective development, where an economic or financial inducement to do the right thing is still needed: it makes financial sense to support sustainable sourcing, we say.

It is economically important to support SMEs, to assist microenterprises in frontier markets to access global supply chains. It is necessary to assure our long-term access to resources, to engage in environmental assessments in the extractive industries or in the financing of long-term projects…

Is it really the case that ethical conduct is unfashionable, or has somehow lost ranking in our collective priorities, or were we ‘never as good as we thought we were’, and thus still in mid-voyage to a state of affairs where ethical conduct is indeed pursued for its own sake?

If we need the economic argument for now, let us by all means put more focus on it, but perhaps do so without losing sight of the larger objective and the loftier end-state.

There are already numerous initiatives, some international in scope, suggesting that success in commercial endeavours ought to be about more than numbers reported in a set of financial statements, and certainly should look beyond the next fiscal quarter.

As those transformational thoughts take hold, ethical conduct will shift from an unfashionable notion (even one rooted in economics) to a critical imperative, perhaps even pursued for its own sake.

Gotta go folks, time for another foray into markets that will stretch my worldview, sometimes test my compass, and perhaps offer a unique experience or two, like dining on black nut chicken in Singapore: the Buah Keluak nut is sufficiently toxic that its preparation includes (you are told upfront!) burying it in soil for forty days to extract the poisons…

How do you define what type of conduct is ethical when doing business in international markets?

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 Disclaimer: The opinions expressed in this article are those of the contributing author, and do not necessarily reflect those of the Forum for International Trade Training.

About the author

Alexander R. Malaket, CITP|FIBP

Author: Alexander R. Malaket, CITP|FIBP

Alexander is a globally recognized specialist in international business, trade and trade finance. He is President and Founder of OPUS Advisory Services International Inc. (Canada)

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