Ethics in International Business

Ethics can be defined as a branch of philosophy that entails systematizing, defending, and recommending concepts of right and wrong conduct. There are several ethical situations/ dilemmas experienced by MNCs in the course of international business. These include:

1. Marketing practices- some laws prohibit misrepresentations in adverts, for instance, the Competition Act no. 12 of 2010 Kenya.

2. Pricing discrimination- in some jurisdictions, it is strictly unlawful to charge different prices for similar products and services without justifiable course.

3. Poor labor practices and working conditions- some MNCs may employ low skills to pay low wages hence exploiting workers. This may be prohibited in some jurisdictions.

4. Corruption- in some countries it may be okay to offer bribes while in others it goes against the societal moral fabrics.

5. Environmental concerns- dumping and environmental degradation is strictly prohibited in most countries and there has been a clarion call by bodies by supranational bodies such as the UNEP to safeguard against the effects of climate change. Proper stewardship may help MNCs grow in this area.

6. Financial reporting- different jurisdictions have different requirements in reporting. It is in reporting that issues of tax declaration and falsification may arise. It is imperative that MNCs employ the best practices in this case.

7. Procurement practices- in certain jurisdictions, the procurement laws prohibit bid rigging, for instance, the Public Procurement Regulatory Act and the Competition Act no. 12 of 2010 Kenya.

8. Industrial espionage- spying on the competitor may be prohibited by the law.

How to adopt and retain ethical standards by MNCs

1. Set standards applied equally in all subsidiaries.

2. Regular training on the business ethics.

3. Follow the customs of a country and avoid engaging in what is morally acceptable.

4. Keep a unique set of ethics which have remedial measures in case of deviation.

Corporate governance

This is a system of processes, policies and rules that direct and control a company’s behavior.

Principles of good corporate governance

        i.            Ensure that the business is in a good legal standing

     ii.            Provide transparency in company’s decision making processes.

   iii.            Cooperation between management and board

   iv.            Prudence in strategy setting and decision making

      v.            Provide framework for action if there is a violation of the company’s code of ethics

   vi.            Ensure that the firm is geared towards long term value creation.

Main elements of good corporate governance

a)      Transparency

b)     Independent leadership

c)      Consensus building/ stakeholder relations

d)     Accountability

e)      Inclusion or corporate citizenship

f)       Adherence to the rule of law.

Challenges to corporate governance

a.      Political interference

b.      Lack of transparency

c.       Bureaucracy

d.     Lack of independent leadership

e.      Conflict of interest

f.        Lack of clear policies

g.      Lack of accountability

h.      Lack of diversity