“Globalisation is process by which events, decisions, and activities in one part of the world come to have significant consequences for individuals and communities in quite distant parts of the globe”. It refers to a deviation to a more unified, interdependent, consolidated and reciprocal, complementary shift in the world economy. In the past few decades globalization has become the buzz word and the focal point for most global companies. With the advent of globalisation various barriers in the business environment has been demolished with an establishment of direct contact with every part of the world which has resulted in the free flow of goods and services since the World War II with dramatic technological changes and development. This development has resulted in changes in life and living status of people, culture enhancement, easier penetration into markets, better communication, quicker flow of money and information, faster travel, global availability of any goods and services and enormous opportunities for the business and economy. With these advancements issues are raised on how companies will gain competitive advantage. Global brands gain the competitive advantage by being ethical. Though many believe that ethics and business cannot go hand in hand one cannot deny the fact that it is an important element of their strategic business goals taking the primary role in an vision and mission statement of any company. As William C Butcher, Retired chairman , Chase Manhattan Corporation puts it, ” “Ethical decision-making isn’t an option today. It’s an obligation-in business, in education, in government, in our daily lives” . Though every company strives to be ethical, the business industry has faced a plethora of unethical acts such as duplication of products, discrimination, child labor, money laundering, cyber crimes, sexual harassment in workplace, environment damages, stealing parents etc. Therefore many companies now have committed themselves to follow business ethics in order to gain competitive advantage, goodwill and a stand in the world of business.
Ethics helps in drawing the line between right and wrong with by imbibing certain principles, values and beliefs which fall into three categories : code and compliance, values and social outreach and it includes respecting differences culturally, honest communication and trust when posed globally.
Challenges /Threats :
A threat to enlightened self interest :
A major threat that globalization poses to ethics is going against the concept of enlightened self-interest. Enlightened self interest is a philosophy in ethics that states that a person or organization that acts to further the interest of others ultimately serve their own self interest which is simply put as “do well by doing good ” or “do unto others what you would want to do unto yourself “. But what globalization poses as a threat is the unenlightened self interest in other words selfishness or greed. Individuals might profit in the material sense by it but the commons are bound to suffer. Greenwashing is one such example of this unenlightened self interest which global companies follow with “Green” becoming one of the pressing words as the demand for green practices with companies striving to appear more sustainable than they actually are in practice for which they inevitably opt for the easy out by using green washing through marketing and advertisements by misleading consumers regarding the environmental practices of a company in order to appear environmentally responsible. H&M has been one such brand promoting greenwashing with its clothing made of sustainablly sourced material and in-store recycle bins where customers drop off their clothes and get coupons instead which is an ethical jumble since all this might seem like they are being “environmentally friendly ” but what they are actually doing is blurring the line between green and greed since giving more coupons is only going to encourage people to buy more clothes which accounts to profitability for the company but pollution to the environment.
A threat to the legal framework :
The world is a unified market and nations and states and there is a stimulation in the growth of the global economy with the increasing international trade and foreign direct investment (FDI). But liberalisation was also imposed on less developed countries who were unprepared to compete at the international market. As a result, the expected growth did not occur and even if it did, it did not bring benefits to all. Unfair tax regime has been imposed internationally which promote western standards which has led to the increase in inequality among the countries. Therefore only the international corporations are the beneficiaries of globalisation. This poses a disruption of ethics since globalisation not only promotes capitalism as a global system but empowers their role as political actors which ultimately implies “a going beyond the borders of state-nations, or even being above them”.
The government’s power is limited only to its boundaries and when economy transactions and connections is extended beyond regional territories, the more the business is prone to escape the control of the national government. A country tends to have a very different legal framework when it leaves it’s home country which gives the position to the managers when deciding on the right or wrong of any business practice. Business ethics begins where the law ends. A behaviour which is considered ethical in one country may not necessarily be ethical in another country. This also poses an issue in cultural differences. For example, The United States considers child labour as unethical but it is quite common in the Asian countries though there are laws that prohibit it. In the same way in China it is unethical to sack employees when faced with downturns but it is quite common in European countries. Therefore globalisation also poses a threat to the legal framework, for example in the above case, an US company might choose to enforce child labour while establishing a business in Asian countries and an European company might sack employees if needed so. Laws are just codified ethics but not all that is considered ethical becomes a law. Therefore this is threat to ethics in globalisation considering the fact that there is always a choice to decide to be ethical or not. For example, Nike products are produced majorly in the south east Asian countries and despite the enormous profits the company makes, these employees are paid low wages with long working hours. The sum of wages of 20,000 workers annual income ois equal to the amount paid to one of its celebrity promoters. Manufacturing outside home country is not unethical but paying substandard wages (which is considered unethical in the home country) is something that poses a threat to the legal framework and this is where corporate leadership plays a very important role. Other such threats include exploitation of workers, unhealthy labour practices, exploitation of tax loopholes, unethical financial processes etc.
Ethics and corporate leadership :
Leadership works as a lever that is designed to support ethical conduct .Globalization poses a lot of dangers that require a leadership which is above all collaborative. There will be a destructive impact on the society if the leadership does not adapt to the changing environment created by globalization. Therefore, the role of corporate leadership is to strike a balance between the opportunities and the challenges that globalization extends by providing the type of ethical values that has its focus on addressing the pressing problems.
Ethics can help protect the society even before any law can because the development in technology is rapid and it is impossible for the government to regulate policies in the same pace. But corporate leaders and the corporate world know well in advance of the dangers in any technology therefore in a place where law fails ethics can play a major role. Therefore globalization provides this platform for the leaders in the corporate world to act ethical and protect even before the danger can occur. For eg, a firm managed by an ethical leader will take measures to prevent child labour or pollution even before any law can be regulated. Further more .A corporation is generally influenced by its leaders who are the primary promoters of ethical conduct Leaders. The leaders are responsible for the the code or conduct of the behavior of its employees and are responsible for the norms and codes of conduct that guide employees’ behaviour. This helps prevent hawking poor quality products and makes them compliant with the laws and statutes and develops their concern for the global communities.
Stakeholder vs shareholder :
A debate has always been a part of ethics concerning the shareholder and the stockholder viewpoints. According to the stakeholder a business has various duties towards the society, environmentally and socially in which it carries out its operation. On the other hand the shareholder view, the primary duty of a business is profit which are a part of its legal obligations to increase the wealth of a shareholder though the employer has his contractual duty towards his employees. A stakeholder business is a moral obligation whereas the shareholder model is a legal obligation. This can invariably pose a threat or provide an opportunity to business ethics. If a company chooses to follow the shareholder theory which enhances short term perspectives, then the company might pose a threat in case of ethics since most scandals and mishandling in an organization is caused by these short term perspective. For example, Adelphia communication which invented subscribers or Enron where the losses and debts where hidden in subsidiaries. But a stakeholder model adopts long term perspectives which does not just limit itself to the shareholder value of the company but also goes beyond and takes the value of the stakeholder into account. This is more relevant than the shareholder model since globalisation creates an atmosphere where both direct( like subsidaries in various locations) and indirect (eg, for raw materials) interactions are global, and beyond cultures and societies. An ethical company will help it’s stakeholders have a part in its success. For example, globalization will provide enormous opportunities for employees where they can integrate their goal and the company’s goal, globalization also provides variety of things for the customers to choose from ,suppliers to produce quality goods and services and to have ethical interaction with their customers etc. Therefore globalization can create a threat if the organization chooses to only follow the shareholder theory but a company to succeed in a global market it ought to act economical, ethical and social.
Professor Thomas Piper, an architect of the business ethics program at Harvard says
“Our emphasis is on a three-lens model: an economic imperative; a legal/regulatory imperative that connects to public policy concerns; and an ethical imperative”.
We believe that each lens is very important; no one lens is sufficient.” Therefore what can be understood is that globalization gives the privilege to the business organisations to choose between a threat or an opportunity and it does not pose any threat or opportunity by itself. It all depends on how ethical an organization and it’s leader is. It is in their hands to either change an opportunity into a threat or a threat into an opportunity.