CHAPTER 7

Global Ethical Strategies and Conclusions

A new road for ethical leadership presented by the author proposes that the definition has expanded beyond the original responsibility of a company vis-à-vis society and the environment. It is proposed that a moral abstract, basic questions of right and wrong, deeply affect “whether a company is operating in a contest of sustainability… in shareholder value calculations.”¹ By housing this element within a leadership context, it follows that executive-leadership characteristics must include an ingrained ethical imperative in order to arrive at the single measurement criteria—shareholder appreciation. As opposed to examining separate companies, proponents of this conclusion cite the fact that socially responsible investment funds like the Domini 400 Social Index and the Dow Jones Sustainability Indexes (DJSI) are outperforming the market, sustaining the premise that shareholder value remains one of the primary yardstick by which success of ethical leadership initiatives is measured. While the next decade numbers are yet to sustain this direction, it is a good working hypothesis for now.

Within the context of sustaining shareholder expectations, six ethical managerial facets are targeted: shareholders, employees, customers, business partners, local communities, and the environment. Good corporate leaders are admonished to provide shareholders with annual reporting on legal and regulatory compliance as well as on social and environmental initiatives beyond compliance and to develop an investment strategy with positive criteria for encouraging activities that involve desirable social, environmental, and business practices and avoiding negative outcomes in such areas. Both employees and customers should be educated as to the social consequences of the leaders’ actions, while business partners who knowingly degrade or cause damage to these six facets of corporate responsibility should be avoided. Local communities supporting regimes that violate basic human rights should be dismissed in the strategic planning process. Not only should environmental regulations and laws be complied with, but also corporate leadership should also anticipate more stringent ones. The accent on the corporate leader brings such decision making back to the individual level where ethics are born and goes beyond mere corporate-organizational compliance with laws and regulations. It targets man’s respect for his fellow men and his general welfare.

Terms of Engagement

In Greek mythology, the gods of Olympus would endow special humans on earth with the elements to ensure them protection on their journeys outside their territories and in their engagements with alien groups. Such strategic implements equate to arming a warrior going off to war with the tools necessary in a combative environment. As depicted in the 1981 movie Clash of the Titans, the hero is divinely endowed with a helmet, a shield, and a sword to enable him to vanquish his foes. Each armament helps increase his ability to proceed safely in alien lands in order for him to fulfill not only his goal but also his destiny. Global firms in pursuit of their agendas might be wise to consider the ethical equivalent of such strategic positioning in the era of globalization. Whether they are called by a military designation or referred to in more politically correct verbiage, such as achieving socially acceptable détente or improving relations with the public at large, the intent is clear—damage control once the ethical issue is engaged. Using the Greek armor analogy, three potential positions can be used.

Helmet Mentality: Do Nothing

Just placing a helmet on the head is acknowledgment of indoctrination into a uniformed group, which can be likened to companies changing their domestic hats for global ones. But in the arena of ethical and social responsibility, it is a neutral position. In Greek stories, the helmet was donned to offer invisible presence to the wearer. Companies that subscribe to the notion to do nothing may be looking to take an indistinguishable path. They may choose to gamble with the consuming public’s mind-set, feeling that it is a trend that comes and goes with no distinct understanding of what motivates or dissuades the buying decision when tied to a moral consideration. By not taking a specific stand, firms can use plausible deniability when accusations arise and then gauge their reaction and required responses accordingly. It also allows companies to defend criticism for a poorly constructed internal code while eliminating the need for implementing its guidelines with staff and the periodic-reporting function. It is akin to symbolic rhetoric recognizing that the best consideration is to do nothing, practice benign neglect, and hence become invisible to the public at large—an decision to fly below the public radar. To place one’s corporate head in the sand with the collateral thinking that if we can’t see them they cannot see us is a valid concept—but we all know what part of the anatomy remains exposed.

On the other hand, this position of just donning the helmet may answer a lingering question: Does social responsibility equate to social change? As global firms encounter varying societies in transitional periods of development, both political and economic, the question of tacit acceptance or desired change arises. Can a firm act socially responsible by doing nothing? Should it wait until the changing social dust settles? It may be prudent to sit back and wait, as the future effect on acceptable ethical criteria may be influenced by the sheer size of the working populations and developing economic strength of emerging nations like China and India as they serve as models for the rest of the underdeveloped world. Westernized concepts that seemingly drive multinational enterprises (MNEs) and contribute to the principles placed in their codes of conduct in regard to labor treatment and workplace standards may be revisited this century. The idea of an 8-hour work day and 40-hour work week with paid overtime along with other beneficial norms could be replaced by more strenuous standards as global competition heats up. As a greater proportion of the earth’s population enters the labor force, a natural depression of wages across all industries may emerge as supply exceeds demand. Less may be received for more and the traditional Western-defined work week may be expanded. While it may seem difficult to imagine westernized nations reverting to lower standards, new benchmarks or universal standards in respect to all areas of managing people could emerge. It might be prudent for multinational firms to stand on the sideline and just don the ethical helmet exhibiting a change in territorial exposure, remaining inert, and acknowledging conditions that must be respected but waiting to take a firm stance.

Shield Mentality: Deflect and Protect

Picking up a shield may allow firms to deflect potential criticism and defend possible allegations of misconduct. It is a preparation that allows companies to prepare for a reactive confrontation if someone strikes the first blow. Many organizations utilize shields constructed by venerable institutions or perhaps through private alliances with industry competitors to present a unified ethical image. They align or graft themselves onto recognized international codes such as the Sullivan Principles, the United Nations (UN) Global Compact, or other internationally proclaimed labor accords. By becoming a signatory and agreeing to abide by such provisions, firms use this proactive positioning to announce their good intentions and draw cover from revered organizations or those alliances they create for themselves. Using a shield prepared by another can be a comforting middle ground between doing nothing, short of acknowledging the matter by merely changing their helmet or getting proactively involved by picking up a sword. At times of challenge the use of a shield, grafting onto a recognized universal code of conduct, provides a viable wall behind which to hide and shelter one from the arrows of public discontent.

The shield constructed of such documents, however, does not require accountability, as the authoring agencies do not have any system to check and report on their members’ actions or inactions. Even some of the self-appointed ethical alliances do not have an outside independent-verification agency. Firms are placed on their honor to abide by their pledged allegiances to such venerable documents and hence need do nothing more than sign up to receive the shield.

Sword Mentality: Institute Change

Placing a sword in one’s hand is indicative of eventual action, a proactive desire to initiate change and alter present conditions. It is an offensive weapon to strike the first blow and thereby gain a benefit before one is attacked. A global enterprise can decide to construct a code of conduct based on the aforementioned universal declarations or devise a custom version. Taking a preemptive course of action could also produce a competitive advantage, especially in industries where allegations of acceptable ethical conduct may positively affect the consumer’s decision to buy. Companies desirous of creating an image of social responsibility, especially in regard to environmental matters in the mineral, oil, and timber extraction industries, might also feel their acknowledged efforts could result in a meritorious public reward, again helping to promote their product offerings.

Such a course of proactive direction requires very careful assembly, inclusion of a monitoring system, and a requirement to issue transparent assessments. It forces the firm to be proactive and make the required changes in its strategic planning systems as well as its operational structures. As taking up the ethical sword signals an intention to influence social change and take responsibility for one’s actions, it comes with a potential danger if not handled correctly. Ethical swords can strike both ways—cutting into moral problems but capable of being turned on the wielder if not masterfully handled.

Global Ethical Road Maps

While multinational corporations (MNCs) may find themselves facing ethical dilemmas requiring a responsive posturing, it would have served them well, in advance of such troubling melees, to have consulted an ethical road map before proceeding on a global journey. Vigilance exhibited beforehand may help avoid missteps on the path and provide a more secure, sustainable passage as firms navigate a world where moral conduct should always be investigated before setting forth. Consulting an ethical checklist on a parallel basis with strategic decision making allows firms to inject into the process an ethical element at the start rather than engaging such issues as a tactical problem down the line.

Ethical Decision Making

Even with the construction of a workable global code of conduct that can be used both to guide the corporate strategic planning process and to handle foreign ethical dilemmas, companies would be advised to question their overall approach to anticipated events. Multinational managers would be well advised to follow an ethical road map to access their proactive actions by reviewing answers to the following questions.

Ethical Stop Signs

•Legal review. Does the anticipated action violate host or home-country laws or international treaties? If yes, don’t do it!

•Firm policy review. Does the anticipated action violate the company code of ethical conduct? If yes, don’t do it!

•Local culture review. Does the anticipated action violate or strongly conflict with the host country’s norms, values, traditions, customs, or long-held theological or philosophical beliefs? If yes, don’t do it!

•Personal assessment. Does the anticipated action violate one’s own moral compass and personal commitments to their fellow man? If yes, don’t do it!

Country Scanning

While a code of conduct can serve as the guiding document for ethical decision making, it does not alleviate the responsibility of global managers to continue their vigilant scanning of potential markets and partners that their firms will engage in the process of exploring foreign developmental opportunities. Companies should be well aware of the alien environments and the parties they will encounter across borders. Two key observations and areas of investigation should always be maintained: an evaluation of the country to be entered to construct firm operations, and the partners or associates in foreign markets that the firm may engage. The following charts illustrate such conditional reviews.

Country-Entry Scanning Review

One should know the country the firm is considering to enter. What is their ethical profile, whether actual or publicly perceived, in regard to the following conditional areas?

•Labor conditions. How are their own citizens and resident foreign workers treated by local employers? What is the level of existing country laws, regulations, and governmental enforcement agencies in regard to protecting domestic labor; specifically child work age, hours worked and overtime, facility safety, hiring and firing practices, union rights, wage garnishment to fulfill employment and third-party obligations, on-site freedom of movement, and the like?

•Commercial atmosphere. What is the effect of local customs and traditions on business operations? Such customs might include acceptance of minorities and women, influence of faith-based institutions, governmental oversight and red tape, and more.

•Global signatories. Have they signed on to international treaties and compacts, such as the UN Global Compact or OECD (Organisation for Economic Co-operation and Development), that direct and obligate their governments to respect certain ethical practices? Do they actively follow such principles?

•World opinions. Is the government viewed as repressive, with negative global perceptions? Do their citizens have a favorable or unfavorable perception of your own home country?

If such questions produce pessimistic answers, the firm is automatically put on notice and may need to reevaluate their strategic considerations, either postponing entry or severely limiting local relationships. And if the country is entered, it will be important to closely monitor activities to avoid potential problems and red-flagged situations as such issues will eventually arise.

Partner-Review Process

The choice of partners greatly impacts the ethical direction of a company as well as its ability to apply the terms of its code of conduct to them. Whether the anticipated local alliance is via the use of an independent import, wholesale distributor and separate sales agent, a third-party, arm’s-length contractor, or any other service provider, their activities will reflect on the principal engaging them. With more complex legal structures like a licensed user of one’s proprietary assets (patents, copyrights, and trademarks) or an equity joint venture, the parties are tied closer together and the actions of the local partnered entity are tethered to the foreign associate, the two seen as acting in concert. Partner selection therefore directly impacts how ethics are interpreted and applied.

Partner Selection Grid

Know well your potential strategic alliance partners and third-party contractors, suppliers, and service providers. What is their background with regard to the following?

•Reputation and prior associations. Have any inspections revealed allegations of human rights and labor incidents or questionable behavior? What is their history in regard to ethical matters and what are the views of local parties, as well as foreign firms that deal or have dealt with them?

•Ethical and social responsibility outlook. Are there initial shared values between the parties? Does the partner consider ethics an essential part of the business process? Does the partner engage in any CSR programs?

•Reaction to firm code of conduct. Can it be incorporated easily into legal agreements and assist in guiding the overall relationship between the parties? Will the partner accept the principal’s code of conduct and actively assist in enforcing its provisions?

•Acceptance of verification systems and penalties. Will the other party accept such additional conditions of the association? Will they consider its incorporation into the base arrangement as an equal duty and responsibility that is subject to consequences if not upheld, including but not limited to grounds for termination?

If such considerations uncover problem areas, the firm would be wise to consider other parties and terminate matters with potential partners as such revelations, even at the negotiating stage, may signal ethical concerns will be encountered down the road when the parties are actually joined.

Ethical Positioning Scale

Firms can also use a global ethical-positioning scale for assessment to determine the extent of the stand they wish to take. They can plan in advance their responsive tactical posturing, so if problems do arise, embedded local managers know how to react.

Relative Positioning

•Low position. A do-nothing, limited measured action, benign neglect leading to plausible deniability if no code of conduct is constructed. A “we knew nothing, so don’t blame us” attitude. The road not taken cannot be criticized for the wrong choice. Stay below the public radar screen with no public dissemination of intent that could be attacked later.

•Medium position. Precautionary defensive posturing based on potentially accommodating critics. Adoption of a recognized global compact that allows a firm to deflect potential critical attack. This position is dangerous, as it may cause companies to be caught in the middle, in that they recognized the issue but failed to completely address it.

•High position. Proactive plans with construction of a strongly defined code of conduct, control and monitoring mechanisms, and goal-measurement criteria along with periodic transparent reports to the public.

Dealing with Ethical Dilemmas: The 4W Approach

Ethical dilemmas normally begin to arise when an ethical imperative in the strategic planning process is missing. It is further enhanced when no local legal structure exists and the ability to consult principles in a code of acceptable conduct, be it a universal convention or individual corporate declaration that directly speaks to the issue, does not exist. Absent these guiding elements, the application of the 4Ws (who, where, when, and why) of provenance may be helpful in approaching the matter. Acting as gates of inquiry, they allow one to navigate a matrix of components affecting decision making when an ethical dilemma is encountered. Ethics requires one to do the acceptable right thing as opposed to the unacceptable wrong thing; thus, ethical dilemmas involve making a decision between two conceivable rights. Coming from the Greek word di-lemma, meaning two propositions, the process requires one to make a choice between two equally justifiable but contrasting alternatives. A correct judgment must therefore be observant of contrary values. Without this recognition, and hence the required inspection, any resultant determination is flawed. A choice cannot be made in a theoretical or cultural vacuum. The choice is subject to conditional realities that are perpetually in flux. In order to appreciate and understand the provisional issues affecting the dilemma choice, the following 4Ws of introspection are offered to allow the decision maker to balance all relevant interests and conditions. The underlying link in the process is to gain a better appreciation of the influence of cultures: that of the host society in which the problem originated and that of the foreigners drawn into the issue. The 4Ws that allow for multicultural critical thinking.

1.List the whos, or those involved and affected. Know the parties or players involved and their respective culturally induced mind-sets controlling their behavior and attitudes. Is the event happening in a collective social environment, where formal relationships are important and the harmony of the group supersedes all, verses an individualistic culture, where personal interaction is less meaningful as people have few obligations to others? Is the power distance between the parties more stringent with a hierarchical structure, where authority status and position are respected, or is society more egalitarian, with challenges to authority more common? Is the culture more masculine oriented, with gender role segregation and a separation of family and work life, or is it feminine, role liberal, relationship directed, and a culture where family and social groups transcend all life? Are they part of a society where differences are tolerated, people take risks, and there is less emotional resistance to change, or do they exhibit strict rule structuring, and avoid conflict and ambiguity?

2.Appreciate the where, or the place the issue has arisen: the social, political, and economic environment in which the dilemma originated. Understand and appreciate the dominant and minor cultures of the host country in which the problematic event has taken place, including historic and current religious overtones and philosophical considerations that exercise some degree of control over the matter. Keep in mind that the foreign venue does not exhibit the same moral influencing conditions found in the home or headquarters country.

3.Acknowledge the when, or the timing of the incident and its relation to history and the current development of the area and commercial setting in which the dilemma surfaced. What is the temporal focus of the society: Is it past, present, or future directed? Is the society rationally sequential and think that time is money, or are their schedules polychromic and their preferences emotionally selected? Has the issue arisen during a transitional period, or do traditional values still prevail? Is the company in its initial exposure period to the new host society and viewed as an alien intruder, or has it been integrated into community as an equal member?

4.After the first three have been reviewed, explore the underlying triggers to determine why the problem evolved. Aim to understand and appreciate the subjective context of the cultural differences that not only ignited the matter but also may impact how it is resolved. The core dilemma can then be determined and shared with all participants, allowing for the inclusion of respective positions of all parties affected. Lastly, use the incident as a learning mechanism for future directional decision making.

Moving through such systematic examination of culturally induced ethical determinant portals allows for a 360-degree vortex combining various approaches resulting in innovative solutions. Culture is the subjective root of ethical dilemmas encountered in business and permeates the personal, organizational, and systemic levels of decision making. Inputting into the process different ways of thinking helps to navigate complicated dilemmas and results in choices that are more worthy and contain a higher moral quality. While the 4W approach reveals surface differences, the prime consideration is the uncovering of shared ethical determination paths and using them to uncover bridges of common understanding in order to reach workable accommodations that require value-laden trade-offs.

Conclusions

As commercial enterprises embark on a global journey, their international managers carry with them an implied and felt dual obligation. They need to act both in their official capacities as firm employees and serve and protect the interests of all groups they encounter based on their individual personal stance. This is their moral and social responsibility to humanity. It is imperative that a code of conduct not be left pinned to the front door of the headquarters but that it be carried by global managers into the world. It is both a shield and a sword in the globalization battle that recognizes a change in helmet choice. As such, it must be practical or “it is little more than greeting-card sentiment” and should address Machiavelli’s fundamental question, “What will work in the world as it is?”²

The Vitruvian Man model built with square absolutes providing universally clear and precise definitional guidance, while encased in a circle of delegated relatives that provide for local, culturally flexible, self-adjusting sets of standards to be applied, may provide for a workable code of conduct. A well-constructed code, while acting as a guide to embedded international managers, is also a valuable additional tool in the global strategic planning process. Companies have three kinds of choices that a firm’s ethical standards impact as they enter a foreign land.³ They can choose between adopting a proactive stance to “strictly adhere to ‘higher’ global standards” (imported absolutes) or maintaining a reactive, more passive position and consider local context (relatives). A third alternative, to either avoid doing business to begin within a suspect country or to pull out of an existing market, impacts multinational selection as well as the entire integration of a firm’s global value-chain network.

Ethics has emerged as a critical component of the global managerial, strategic decision-making process. As Epictetus, a Greek philosopher, noted to the people of his day, “You do the greatest service to the state if you shall raise, not the roofs of the houses, but the souls of the citizens: for it is better that great souls should dwell in small houses rather than for mean slaves to lurk in great houses.” Global corporations would be well advised to consider such direction as they erect their world dwellings. They should work to ensure the laborers who are used to construct them are treated with dignity and respect, or such institutions run the risk of being destroyed by their very builders and supporters, the eventual consumers the labor produces. Commercial enterprises venturing outside their borders on a worldwide journey to mine the rich human resources of the global value chain should heed to the refrain from the popular 1970 Crosby, Stills, Nash, and Young song “Teach Your Children”: “You, who are on the road, must have a code, to live by.”⁴

Large multinational firms, with revenue streams eclipsing most national gross domestic products, employing thousands in varying countries and exercising global political clout, are in essence modern empires unto themselves. Like historic figures Alexander the Great and Genghis Khan, the conquerors of their then-known worlds, such massive commercial forces need to contend with the governing of those whose lives they impact and influence. The world’s population is developing a dual allegiance to alternative but equally compelling institutions. As citizens of their individual countries, they will look to national governments to protect them while providing basic social services. They are, however, becoming more and more beholden to the multinational behemoths to supply job opportunities, to offer required products and services, and to generally sustain and improve not only their economic condition but also their lives.

As the era of globalization morphs into a truly new worldwide socio-economic-political system, transnational business entities may replace world governments. In the original version of the movie Rollerball, the story line envisions a future world where MNCs run everything. They provide all the products and services the earth’s population needs and desires; national governments are redundant.

The only element they lack is an intrinsic requirement to behave with an ethical imperative. However, like governments that do not act morally and fail to look out for the welfare and rights of their citizens, the constituents of such global enterprises, the worldwide beneficiaries of their products and services, will be watching them more carefully and expecting them to act morally. To the growing group of traditional stakeholders, companies may need to add to the world at large. The very success of such enterprises may hinge on their construction and implementation of a universal code of conduct, equitable and transparent to all.

An ethical wake-up call is sounding for global enterprises and they need to heed to the message. As globalization is the result of a natural progression of world commercial development so must be the creation of universal codes of conduct that accompany such a phenomenon.

Another Time-out

Throughout the text the author has tried to present varying ideas on the development of global labor standards during the era of globalization. As new labor groups are brought into the worldwide system, and therefore different approaches surface, it is hard to codify exactly what will emerge as universally accepted criteria. A step in this direction was taken in April 2005 when Nike, Patagonia, Gap, and five other companies joined with six leading antisweatshop groups to attempt to devise a single set of workable labor standards coupled with a common factory-verification system. The effort, to be known as the Joint Initiative on Corporate Accountability and Workers’ Rights, began its work by running a pilot project in several dozen Turkish facilities that produce products for the commercial partners. Its goal is to use the experiment, over a two-and-a-half-year period, to test and create a broadly acceptable range of labor standards. What is unique about this approach is that it has the joint backing of the commercial sector and activist groups like Social Accountability International (SAI), a strong advocate of corporate transparency in the treatment of labor in global factories. Today, three primary groups are involved with inspectional overseeing around the world. Besides SAI, the Fair Labor Association (FLA) and the Ethical Trading Initiative, a group made up of European unions, nonprofits, and companies like Marks & Spencer and Sainsbury’s Supermarkets, are working toward transparent monitoring and reporting systems. These proactive measures, especially when they are composed of a broader array of participants in the global supply chain, acting in unison and toward common goals, is a most promising step. Such efforts, however, may reverse the pressure on multinational firms to either embrace an existing code of conduct or construct their own. It may be a signal to take a time-out, wait until the learning process crystallizes the issues, and then build commercial codes of conduct on a wide, global platform of acceptable principles.

Ethics as a Strategic Imperative

Great leaders, be they in business or other fields of endeavor, don’t react they anticipate. One has to know what is going to happen. Reacting to an outside stimulus often occurs too late and subjects one to another’s agenda. Knowing what to do in advance means being prepared. Research the subject, learn the common mistakes, withhold premature decisions, and appreciate your standards—then go out and apply them. This book was intended to foster thinking and discussion about the issue. It attempts to offer the reader a balanced set of ideas and varying avenues of ethical pursuit.

The literature on strategy, its definition, its goal and structural intent role as well as its practical use, could fill a small library. The term strategy (from the Greek strategia, meaning generalship) refers to moving troops into position, deployment of resources after actual engagement tactics are used. One observation of strategy is that it is the means by which policy is effectively achieved. All books on strategy open with a discussion on strategic intent, a mission statement of proposed direction and policies to be employed in achieving them, in essence defining the agenda. A wise man once said, “Know his agenda, know the man.” The author, however, could not help but interject a bit of prejudicial influence, believing that ethical behavior is part of mankind’s social contract with his fellow men and the earth, his lifelong agenda. George Steiner, a pioneer in the origins and practices of strategic planning, in his book Strategic Planning proposes a number of definitions for strategy.⁵ One reference, that strategy is composed of directional decisions as to purposes and missions, stands out as it encompasses a broad spectrum that also includes an ethical component. Kenneth Andrews presents this lengthy definition of strategy in his book The Concept of Corporate Strategy:

This view of strategy encompasses the wider social environment in which business entities operate and as such demands the incorporation of ethics in the strategic planning process. Michael Porter, a scholar who writes about competitive strategy as opposed to its more generic characteristics, sees strategy as “about being different,” positioning a firm to offer something unique in the marketplace⁷ perhaps an ethical component that resonates as a perceived added value not just to customers but with all stakeholders in the company. Fred Nickols, under the auspices of Distance Consulting LLC, presents strategy as a “bridge between policy or high-order goals on one hand and tactics of concrete action on the other.”⁸ He asks companies to question what kind of company they are, what they want and must become. Without specifically mentioning a moral imperative, his use of the words “high-order goals” seems to imply a social responsibility intent with some type of ethical conduct embedded in the goal.

While sections of this book have presented tactical response, once the ethical dilemma has been engaged the primary consideration is to integrate suitable and sustainable ethical policy in the formation of corporate strategy. It is a foundation upon which the building blocks of companies are constructed. MNCs would be wise to heed this direction imperative as would their decision makers, the executives of tomorrow, leading their firms into the modern globalization era. William Lazonick writes about a new economy business model that sees the “fortunes of the rich and poor joined,” as firms move their operations and activities to more and more developing nations.⁹ Such wider and increased social engagement begets ethical dilemmas. As firms construct their strategic plans an ethical component needs to be introduced into them.

Final Thoughts

MNCs need to put aside the historic parochialism that had them addressing ethical issues from a tactical-reaction position. They have to take the long-term systemic view, beginning at the strategic planning stage. Firms should formulate a uniform, universal policy disseminated with an institutional code of conduct that is supported by empirical and objective data as developed from an organizational system of inspection and verification. Such direction should eclipse the traditional shallow, insulated, home-office indoctrination. It should take into account differences in economic development and socially induced traditions and customs as well as context, while maintaining basic human rights principles that transcend all other variables and fall outside the bounds of cultural diversity. Globalization is a permanent commercial phenomenon. It therefore makes good business sense for MNCs to meld ethics and social responsibility into their global strategies. Global commercial moral clarity only emerges when the issue is engaged. That procedure begins when the matter is reflected in the intent and mission statements of companies and then placed in the strategic determination process, thereby creating tactical administrative and operational programs that support and promote ethically connected capitalism. It is hoped that construction of a code of conduct that is used in the strategic planning process will enable managers to design commercial reality rather than merely reacting to it. In the end, it is a win-win situation for all.

One final restatement remains. MNEs are one of the key components in the modern global socioeconomic-political system. The commercial intent of MNEs is to leverage their international networks to create competitive advantages over their rivals. The strategies to accomplish such a goal result in continuous geographical rationalization of their value-chain activities around the world. These transnational leviathans, larger and wealthier than about 120 nation-states (as measured in gross national product and previously noted), prowl the world in search of new physical and knowledge resources, new labor pools, and new sales markets. While maintaining a basic, singular, territorial, sovereign identity due to their countries of origin or executive headquarters affiliations, they are truly citizens of the world with little or no national allegiance. They are so big that like tsunami they create their own path, crisscrossing countries under their own economic muscle. They are virtually a new instrument born out of the globalization phenomenon. They are extraterritorial ambassadors moving around the globe creating universal relationships, far-flung partners, and commercial alliances while unifying consumers and utilizing common but dispersed workforces. In mature, capitalistic free markets, they have always been a force. But in emerging nations, they sometimes usurp the ability and responsibility of the local government to guide socioeconomic changes, while in former communist societies they are replacing state-owned and state-controlled enterprises thereby becoming a new foundation for the lives of such embedded citizens. Their world influence has begun to rival the traditional power and prestige of great nations throughout history, while their image projects across the globe to a degree only achieved by religious doctrines. No wonder, with such endowed characteristics, they are perceived and judged as any leaders are: as hopeful purveyors of good or acceptable ethical principles and appliers of social responsibility.

It is against this backdrop that global business and global managers must construct their strategies, marshal their tactical activities, and make their decisions in the 21st century. They will be watched, criticized, and praised as they carry out their missions. It has been the intent of this book to prepare managers for this added requirement: The construction and administration of their transnational duties and responsibilities as leaders of their respective global organizations.

Managerial Reflections

1.A series of tactical responses is offered when an ethical issue is encountered by global firms stated in terms of a warrior’s adornments: helmet, do-nothing, neutral posturing; shield, a prereactive defensive maneuver; and sword, a proactive planned offensive. Such deployments would acquaint with what points on the ethical positioning scale: low, medium, and high?

2.Ethical stop signs prompting a review of potential ethical issues are noted to help a firm navigate in its global operations. At what level of the organization should such a review be conducted—headquarters, regional, or local, and who should participate—what divisions, specialized personnel, and outside consultants?

3.A country scanning model is introduced to catch potential ethical problems. Beyond the objective considerations should the opinions of NGOs and perception of consumers be part of the evaluated criteria?

4.A partnership evaluation chart is included to investigate the ethical practices of anticipated associates the firm may engage in its foreign operations. Apart from those with whom they will have a legal contractual arrangement and hence an opportunity to introduce ethical provision into the agreement and monitor them, how far down the supply chain or up the customer distribution succession should the inquiry proceed?