Whose Ethics? Importance of LDC’s Participation in CSR

ethic

The ethical values and standards that a business incorporates determine to an increasing extent, its stature in society, and play an imperative role in maintaining and encouraging public trust and confidence in its products and services. In this sense, businesses are playing an intrinsic role in our lives, and it is only logical that we expect more from them in terms of responsible and ethical behaviour: behaviour that reflects the values of the societies businesses operate in. However, the definition of what constitutes “right” or “wrong” is being continuously challenged as Corporate Social Responsibility (CSR) becomes increasingly prevalent in corporate activity. As global companies and local communities become more inter-connected, there is growing importance in challenging the moral effects and consequences of cross-border businesses and the operations of multinational corporations (MNCs).

Although still not as dominant in less-developed countries (LDCs) as in the developed world, CSR has been making a big impact across the globe. As an LDC national, I am very encouraged by the positive potential of CSR. However, I am equally concerned about the ethical and cultural imperialist tendencies of MNCs, which are largely controlled by a handful of the world’s economically wealthiest nations. Can global corporations operate ethically across borders without diminishing local culture and values? We must explore, as this article will, whether there are grounds for such concern from the point of view of the host nation and the extent to which ethical and cultural relativism is a serious consideration for corporations implementing CSR policies in the developing world.

What is Right or Wrong?

CSR is, to a large extent, a response by corporations to the moral concerns and expectations of their key stakeholders: employees, customers, neighboring communities and shareholders (among others). As a remedy to stakeholder concern, CSR policies must incorporate a set of corporate moral values which take into account societal notions of responsible moral behaviour.

Questions that revolve around the nature of morality traditionally concentrated on the actions of individuals but now the focus includes the conduct of corporations. Relativists argue that notions of right or wrong differ from one society to another and that no one culture is better than another. However, across the spectrum, ethical absolutists believe in the existence of absolute ethical standards which determine what is good or bad for all humanity. They would argue that a company should employ exactly the same standards and attitudes abroad as it does at home. This debate leads to questions pertinent to the global community in which MNCs operate: are standards of good and bad relative to the culture and place in which they exist? Are values absolute or could they change over time with each new generation, or management structure, for instance? If they vary, whose ethics should prevail? Should CSR practices presuppose the existence of a universal set of values?

Is the “Balance of Power” Balancing?

In the world of CSR, the influence of ethical norms and differences on cross-border business activities is a topic of heightened controversy. The growing acceptance of relativism “both cultural and moral” is seeing a shift in the “balance of power”. As CSR becomes more integrated into business-models, attention must be drawn to the risk of imposing the moralities of the home country onto the host. For example, a U.S. computer company conducted a training course in a subsidiary in Saudi Arabia. The course included a case study where a senior employee makes sexually explicit remarks to a new female employee over drinks in a bar. Not only did the intended message of condemning sexual discrimination or harassment feel irrelevant to the local participants, it led to confusion and offence because the norms governing gender interaction as well as social outlets are very different for the company’s Saudi employees.

Multinational corporations have to consider the appropriateness of respecting local culture and adopting the moral vocabulary of the host country. A major concern for corporations is that the distinction between ethical and unethical behaviour relative to each society is becoming increasingly difficult to distinguish. If implemented correctly, CSR policies have the potential to do much good in the world, especially in LDCs where governments and local institutions are often weak. However, the danger that CSR poses if Western values are deemed absolute is moral imperialism at the expense of undermining cultural and moral differences across the globe.

The main ethical dilemma is whose ethics should prevail when values are in conflict? Should corporations invest in a foreign country that does not allow employees to form a trade union? Should corporations replicate local practices of pay-offs and bribery? What about establishing industrial plants in developing countries which have lower standards of labour and environmental laws?

Has Globalisation Endorsed Relativism?

The more we interact with societies from distant parts of the world, the more we challenge whether the values and codes by which we live are true and absolute. After all, when we make moral judgments we do so in the name of our own culture and beliefs. MNCs have to be aware of local differences to avoid culturally cacophonic practices.

A non-relativist approach to CSR imposes the homogenisation of standards, which may not be reflective of reality. An MNC expecting to face the same challenges in a host country as at home, will often find itself unprepared in dealing with changing situations. Even if the problems are the same, the options available may differ.

An interesting example is the case of gift-giving, a normal tradition in many non-Western societies. Sharing small gifts, the omiyagi in Japanese culture for instance, is an intrinsic part of business interaction, it symbolises reciprocity and relationship building although commonly misconstrued as bribery by Western corporations and misinterpreted as wrong rather than culturally relative. An African perspective was offered by the Olusegun Obasanjo, the former president of Nigeria when he criticised the assimilation of the tradition of gift-giving into corruption and bribery:

I can speak only for Africa. But what holds true in my own continent may apply in other parts of the developing world. I shudder at how an integral part of my continent’s culture can be taken as a basis for rationalising otherwise despicable behaviour. In the African concept of appreciation and hospitality, a gift is a token; it is not demanded; the value is in the spirit of the giving, not the material worth. The gift is made in the open for all to see, never in secret. Where a gift is excessive it becomes an embarrassment, and is returned. If anything, corruption – as practised by exporters from the north as well as by officials in the south – has perverted positive aspects of this age-old tradition.

This clearly illustrates the importance of context when evaluating different practices, while ensuring that they do not violate universal norms. The similarities in moral reasoning must be embraced to avoid wrongness by those who use relativism to mask immoral deeds.

Relativism: a Scapegoat for Unethical Practices?

CSR has come a long way to protect local employees from exploitation by money-hungry corporations. In the process it has become clear that some activities are wrong wherever they take place. The moderate form of relativism discussed here should not be misused as a scapegoat for oppressive regimes such as Mugabe in Zimbabwe, genocide by Nazi Germany or corporate irresponsibilities such as the use of forced-labour. Therefore, it is fundamental to eradicate the justification for such atrocities on the basis of ethical or cultural relativism. Forced-labour or abuse of workers should never be accepted because there is no society which will consider this behaviour morally correct even if it is common practice. In a case reported by the United Nations Research Institute for Social Development, a fire in an international company’s toy factory in Thailand killed close to 200 employees because not only did the management have a defective sprinkler system but it had also locked the workers inside the plant. There can be no justification for such immoral and irresponsible corporate action.

A controversial yet interesting case study is the employment of children. In most of the developed world child-labour is prohibited by law and morally condemned, therefore, MNCs operating in LDCs would be inclined to adhere to the same conditions. However in agrarian and rural societies, children are often expected to help work the land. This is part of local family traditions, not only accepted but morally encouraged and economically necessary. Moreover, because these societies often do not have the infrastructure to provide adequate schooling, rural children would have no other means of subsistence if not for the work they do in the farms. Without understanding the local norms, a corporation aiming to be responsible and refusing to hire such children can actually cause damage to the society it tries to protect. The employment of children should not be unchallenged simply because it is common practice; instead it should be assessed in the context of the children’s well-being. Attention needs to be placed on the options and alternatives available within the context of the local community. For instance, an alternative could be to provide schooling and financial aid for children of rural workers. Another route that works is employing children, but only outside of school hours. Companies can work with educational non-profits such as The Education and Health Development Foundation in Islamabad, which recognises the reality that some children must work. EHD arranges separate classes for working children acknowledging that number of working children in Pakistan is in the region of 11 – 12 million, but facilitates their inroads into a future brightened by the light of education.

CSR policies have great potential for good when they work in conjunction with local governments and institutions to improve the social conditions that are lacking due to weak infrastructure in LDCs.

In the environmental arena, corporations face important strategic decisions as to whether they should adopt the standards of the home nation or adapt their standards to comply with local requirements. Managers need a local understanding in order to ensure a healthy long-term corporate strategy. We do not have to dig deep in our memories to find scandalous illustrations of negligent corporate behaviour which has left a lasting harmful impact. The 1984 Bhopal disaster in India exposed half-a-million people to toxic chemicals during a catastrophic gas leak from a Union Carbide plant. The indus-trial disaster shocked the world and raised fundamental moral questions about corporate responsibility for accidents that devastate human life and local environments. Union Carbide exploited lower local standards without compensating for the lack in infrastructure. Although they may have followed local environmental regulations they were far from complying with a responsible code of conduct which would have avoided the accident. The question then becomes: if MNCs from developed countries operate in LDCs with inadequate environmental regulations, whose ethics should prevail? Once again the answer is relative to each context. As discussed in the case of Bhopal, the decision by Union Carbide was clearly wrong as it did not have a triple bottom-line concern. Corporations must consider all their stakeholders when making their choices.

Why Does the Debate about Ethical Relativism Matter to Business?

The apprehension of managers to insert more subjective measures such as ethics and morality into business analysis is understandable. These value-judgments are difficult to determine, quantify and calculate. However, the reason this matters is because CSR is about irresponsibilities; it is about business having a positive impact in the society in which it operates and in turn benefiting from that cycle of positivism. To do so, managers need to have a meaningful insight into the value-system of those influenced by the corporations activities. Recognition must be given to the demands of all those engaged in the business, be they employees, suppliers, customers or any other stakeholders. MNCs need to understand the ethical framework and moral vocabulary of where they operate and also be aware of problems that could arise due to these differences.

A controversial argument is made by Donaldson, T. in Values in Tension: Ethics Away from Home to support the actions of a government and society which may choose to act in ways which may at first seem unethical. He uses the example that in times of famine it may be wise to use more fertilizer in order to improve crop yields, even though that means settling for relatively high levels of thermal water pollution. This example should not be used to justify unethical environmental behaviour but simply to illustrate once again the importance of understanding local context also as they apply to a nation’s developmental stage. Astute relativity is key.

Alaison Maitland in “A responsible balancing act” discusses a study which shows that stakeholders across the globe have different priorities which dictate their expectations of corporate behaviour:

There are common threads: consumers in the US, France, Italy, Switzerland, the Philippines and much of South America agree that the most important thing a company must do if it wants to be regarded as socially responsible is to treat employees fairly. But the differences stand out and they mean that multinationals cannot hope to build public trust with a single global message.

The challenge for corporations taking responsibility seriously is to ensure that their CSR policies strike an appropriate balance among these differences. Through increasingly affordable travel and communication, we live in a global age with constant exposure to contrasting ideals. This exposure ensures that having global brands in every country is already contentious but to have those businesses impose their ethical standards would certainly be unsustainable. In today’s interconnected world, corporations cannot conceal their unethical practices in hidden corners of the world. Moreover, the opening of global markets also opens the way for a stronger global civil society. The stake-holders, whose concerns dictate corporate values, are now both at home and in host countries. The business realm is no longer a morality-free zone. By engaging in CSR practices, corporations are committing themselves to ethical considerations spanning borders.

The application of universal values established through international consensus, such as human rights, is among the biggest challenges facing the future of corporate responsibility. However, this must not be done through imperialism; emphasis must also be placed on LDCs’ participation in the process.

To generate profits at the expense of each other is no longer acceptable, instead corporations must be more responsible: economically, socially and environmentally. The emphasis needs to move away from the traditional economic bottom-line to a modern triple bottom-line. This changing expectation of the role of business signals the increased significance for corporations to assist countries which lack in infrastructure or institutions that would protect its people.

References

1. D’Souza provides an insightful analysis of the practice of gift-giving in Asian cultures and provides an understanding of gift-giving for a more systematic assessment of relationship building. D’Souza, C. (2003). “An inference of gift-giving within Asian business culture.” Asia Pacific Journal of Marketing and Logistics. Volume 15: 27-28.

2. Obasanjo, O. (1994). “Positive Tradition Perverted by Corruption.” Financial Times, 14 October 1994.

3. United Nations Research Institute for Social Development. (1996). Transnational Corporations: Impediments or Catalysts of Social Development?

4. De George, R. (1995). Business Ethics. Englewood Cliffs, N.J.: Prentice-Hall Inc.

5. See Amnesty International report (2004), Clouds of Injustice: Bhopal disaster 20 years on, which looks at the human rights impact of the leak as well as the concerns over accountability.

6. Donaldson, T. (1996). “Values in Tension: Ethics Away from Home”. Harvard Business Review. Sept/Oct 1996.

7. Maitland, A. (2005). “A responsible balancing act. Strategic Management: Global companies must be sensitive to different concerns of consumers worldwide but must avoid double standards.” Financial Times, 1 June 2005.

    Author Information

    Flavia Thome has worked as a consultant for Accenture and is currently working as a Programme Administrator at the International Institute for Sustainable Development (IISD), based in Geneva. Born in Brazil, she has a BSc in Economics and International Development and an MA in Global Ethics from the University of London.

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