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32

The globalization of business ethics

Kirk O. Hanson

Between 1975 and 2015, the study and practice of business ethics became a truly global phenomenon. Its development paralleled the growth and integration of markets in both the developed and developing world. The study and practice of business ethics became global as markets became global.

During this same period, multinational firms from developed Western countries, and increasingly from developing countries, became “global enterprises.” Global companies, operating in countries around the world, needed to meet the ethical expectations of their home countries, but also the ethical expectations of the growing number of countries in which they now operated. In developing countries, where oligarchies often controlled key elements of the economy, a new awareness of the costs of corruption and other questionable behaviors led to a growing demand for ethical behavior by local leaders in both business and civil society.

These developments led to a growing desire for what came to be known as “global ethics,” a common global standard of behavior for businesses, for non-governmental organizations (NGOs), and for governments themselves. In addition to the search for a global ethic among intellectuals and managers, there was an explosion of organizations creating and promoting specific standards of global ethical business behavior. Companies were asked, and frequently pressured, to pledge to follow these multiple standards. At times, executives of these companies felt besieged by requests to provide detailed information on their operations in anticipation of or as a result of their decision to join these “voluntary” organizations.

Academic scholars followed these developments, chronicling the growing interest in global business ethics and making some significant contributions to its progress. But interest in and the study of business ethics had first emerged in the United States and in US graduate schools of business.

This chapter describes how the concept of business ethics emerged in the United States in the 1970s and 1980s, in business schools and then in corporate practice; how in the 1980s and 1990s the concept then spread beyond the United States to other parts of the world; how the globalization of the world economy changed the debate over business ethics; and how corporate programs to implement a global commitment to business ethics developed. The chapter ends with a discussion of the challenges faced in defining and implementing a commitment to global business ethics.

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Business ethics emerges in US business schools

Business ethics first emerged as a management concern and as an academic subject in the United States in the late 1970s. Two specific episodes drove this development, though the general context was the dramatic growth of global trade.

A significant number of American business leaders and their firms made illegal campaign contributions to the reelection of US President Richard Nixon in 1972. Simultaneously, the leaders of these increasingly multinational US enterprises made payments or bribes to politicians and government officials in numerous countries to win business. During the mid and late 1970s, over 100 major US companies admitted publicly that they had made the illegal campaign contributions and more than 200 admitted to bribery of foreign officials, which some euphemistically called “unusual payments abroad.” The Lockheed Corporation’s bribery of Japanese officials and Diet members to secure the sale of L1011 commercial aircraft to Al Nippon Airways was the iconic bribery case of the era, but was simply a well-documented example of a much broader problem.

The immediate impacts of these scandals were laws that imposed stronger penalties on companies and their leaders. United States legislation passed shortly after President Nixon’s forced resignation from office restricted corporate political meddling (though subsequent court cases weakened the constraints). Cases of overseas bribery led to the adoption in 1978 of the US Foreign Corrupt Practices Act (FCPA), which made it explicitly illegal for a representative of a US company to bribe an official of a foreign government. Almost forty years later, the FCPA is still a major concern of American companies as they operate more and more outside the United States. Among most observers, the FCPA is regarded as an effective vehicle in the campaign against corruption (see, for example, Urofsky etal. 2012). Companies have major anti-bribery programs for their own employees, sometimes focusing on the special problems of doing business with state-owned enterprises whose managers fit FCPA definitions of public officials.

One impact of these two scandals was a call for an emphasis on business ethics in leading schools of business. How could respected US business leaders, some asked, have engaged in these behaviors? As many were graduates of the country’s major business schools, attention focused first on the development of business school courses that could “teach” ethics to the next generation of business leaders. In the 1978–1980 period, the major United States business schools hired their first dedicated business ethics faculty. Harvard, Stanford and Wharton business schools created elective courses, and academic conferences on business ethics proliferated. Prior to 1978, a few academics had studied business ethics, but they tended to be located in Catholic, often Jesuit, colleges and universities.

Over the next 20 years, elective and then required courses on business ethics became the norm at most major American business schools, encouraged by accrediting standards that all but required such attention (AACSB 2013). Two professional associations of faculty emerged. The Social Issues Division of the Academy of Management, which had been launched in 1971 by business school professors, increasingly focused during the 1980s on business ethics as well as on the “social responsibility of business.” The Society for Business Ethics, launched in 1980 by philosophy professors who studied the applied field of business ethics, grew gradually over the 1980s through the 2010s. After 2000, membership in the two associations increasingly overlapped and the organizations’ professional meetings were held back-to-back in the city where the Academy of Management had held its annual national conference.

A focus on business ethics emerges in US corporations

Attention to business ethics in US corporations was generally limited to legal compliance with explicit laws and regulations such as the FCPA and with increasingly numerous consumer and clean air and water regulations adopted in the 1960s and 1970s. Only in 1983 did explicit corporate attention to business ethics emerge, first with a few top management seminars and then with ethics training for all employees at two defense firms: McDonnell Douglas pioneered company-wide training on ethics, followed quickly by General Dynamics in the aftermath of the emerging defense industry scandals of the mid-1980s.

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The US defense industry scandals of the 1980s, in which virtually all twenty major defense contractors were found to be mischarging the Defense department for products and for research time, was instrumental in launching formal corporate attention to the management of corporate ethics. The scandal led to the formation of The President’s Blue Ribbon Commission on Defense Management, headed by David Packard, then Hewlett-Packard CEO and a former Deputy Defense Secretary. On the day that the Commission issued its final report, GE CEO Jack Welch announced that twelve major defense contractors were forming the voluntary Defense Industry Initiative on Ethics and Compliance (DII) to establish standards for the management of ethical behavior and measure their progress toward that objective. This step was the beginning of expanded corporate attention to business ethics, initially in the defense industry and later in the financial services industry, engulfed by the first of several scandals in the late 1980s.

At this point, however, attention to business ethics was almost exclusively an American concern and was generally ignored by companies in other countries. Critics of the emphasis on ethics at the time said Americans were tying one hand behind their backs in competing internationally with European firms who did not hold to similar ethical standards. They argued that American firms would also lose out to local companies in many countries where corruption and payoffs were common. Predictions were that the American concern for business ethics would hinder the global economic success of US firms.

Academic research and publication developed several core concepts that undergirded the development of business ethics. Among the most widely studied were the “interpenetrating systems” model of business–government and business–society interaction developed by Lee E. Preston and James E. Post in 1975 (Preston and Post 1975). Wharton professors Thomas Donaldson and Thomas Dunfee expanded on existing notions of social contract theory to describe how global companies contracted with multiple countries and multiple stakeholders (Donaldson and Dunfee 1999). University of Virginia professor R. Edward Freeman and a succession of co-authors developed various versions of “stakeholder theory,” which modeled forces influencing the firm’s freedom to operate and encouraged the firm, either through governance or management, to take into account the interests of these forces or “stakeholders” (Freeman 1984; Freeman etal. 2010). In addition, University of California Berkeley professor David Vogel wrote a series of books employing political theory to explain how companies and society interacted and reached policy if not value consensus (Vogel 1995, 2005; Vogel and Ansell 2006).

Interest in business ethics beyond the United States

Interest in business ethics outside the United States was initially evident in religiously based circles. Beginning in 1892, Roman Catholic popes had issued what were known as social encyclicals or letters that addressed the moral issues in society, including how business operated. Pope Leo XIII issued the first of these encyclicals called Rerum Novarum (Leo XIII 1892). It focused in part on the rights of labor. In 1991, Pope John Paul II summarized a century of papal social teaching in Centesimus Annus (John Paul II 1991). And in 2013 and 2015, Pope Francis promulgated the most extensive papal commentary on global business behavior in two documents, an apostolic exhortation Evangelii Gaudium (Francis 2013) and his encyclical Laudato Si, the first papal document to address moral responsibility for the environment (Francis 2015).

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Since the mid twentieth century, Christian (particularly Catholic) associations of businessmen held conferences and pledged adherence to religious values embodied in the Christian gospels and in Catholic social teaching embodied in the social encyclicals. One of these associations, the International Christian Union of Business Executives, known as UNIAPAC, was created in 1931 and has championed intellectual and practical inquiries into how business activity can serve the common good. In the United Kingdom, in the 1970s, the Institute for Business Ethics, which grew from a religious movement known as Moral Rearmament, campaigned for higher standards of business behavior and assisted companies that wanted to adopt business ethics programs.

In the 1980s, the teaching of business ethics by major American business schools also led major European business schools, particularly London Business School, INSEAD in Fontainebleau and IMEDE in Lausanne, Switzerland, to consider incorporating business ethics into their curricula. By the 1990s, the accrediting body for business schools, the American Association of Collegiate Schools of Business, adopted its first accrediting standard that required some attention to business ethics (AACSB 2013). This led business schools worldwide, seeking to emulate American business education, to take notice and launch attempts to integrate business ethics into their curricula. The 2013 Standards, the latest adopted by AACSB, require attention to ethical reasoning but do not specify how the topic is to be addressed, whether in a separate course or integrated into other courses. Some critics believe the AACSB standards should be more explicit about the attention to ethics required in a business or management program (see, for example, Swanson and Fisher 2011, and Franks and Spalding 2013)

In the 1980s, a small group of European academics created the European Business Ethics Network and began holding an annual conference. Nationally based networks also sprang up, notably the Italian Business Ethics Network that was particularly active. Academics in the US and Europe formed the International Society of Business, Ethics and Economics (ISBEE), which holds a world congress every four years. In 1990, a group of younger academics from Europe and the United States formed the International Association for Business and Society (IABS), which meets in alternate years in Europe and the United States.

There had been, for several decades in the mid-twentieth century, a concern for the behavior of multi-national companies (MNCs). This concern increased significantly after World War II as many companies developed more international trade, often with their former colonies. However, these companies were accurately described as transnational or multi-national rather than global. They might source raw materials in one country to supply manufacturing and consumption in a home market. They might expand their sales effort to one or more neighboring countries, but were not yet engaged in what we now call “global trade.” The MNCs often dwarfed the governments of countries they sourced from or operated in and therefore could force or bribe officials in those countries to permit the MNCs to operate with few constraints. These companies frequently paid little attention to ethics or to the interests of the host countries. Professor Raymond Vernon of the Harvard Business School was one of few who wrote extensively on the power and responsibility of MNCs (Vernon 1977).

The global attention to corruption and bribery in the late 1970s changed the discussion significantly, leading to the FCPA in the United States, and to a growing pressure in some countries, to root out corruption, particularly among government officials. In the 1980s, the Organization for Economic Cooperation and Development (OECD), composed of leading developed nations, adopted a code of corporate behavior that was enhanced several times over succeeding years. Its strongest statement about corporate bribery was adopted in 1997 in the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (OECD 1997). In 1993, Transparency International, a Berlin-based NGO, was founded to create locally-based associations in many countries dedicated to reducing business corruption.

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Two other developments in the 1970s and 1980s hastened the global spread of concern for business ethics. One was the persistence of the apartheid regime in South Africa, which by law restricted the work, residential, and citizenship rights of black and colored (mixed race) people. While activist pressure was particularly focused on US companies operating in South Africa, urging them to challenge and disobey the government’s racial exclusion laws, pressure was also applied to European companies operating there. Led by a charismatic US Baptist minister Leon Sullivan, who served on the board of directors of General Motors, the Sullivan Principles movement was created and pressured companies to follow a set of equal working rights principles—or leave South Africa. When General Motors was stopped by the Apartheid government from following the Sullivan Principles, the company sold its South African operations to its local managers and departed. Other companies, including Hewlett-Packard, departed when government and private buyers of computers in the United States declared that any company that still operated in South Africa was ineligible to bid on large computer contracts.

The other development was the growing social investor movement in the United States. Activists acquired shares in companies in order to present shareholder resolutions requesting or demanding changes in corporate behavior. In 1970 an organization called “Campaign GM” submitted what is considered the first “social proxy resolution” to the shareholders of the world’s largest corporation, General Motors. The resolutions in 1970 and 1971 demanded the appointment of minority and consumer representatives to the board of directors, and attention to vehicle safety and environmental impacts. These resolutions, like most social resolutions to other companies that followed in the 1970s through 1990s, failed to win more than a token vote, but occasionally led to voluntary action by companies to implement ethical and social initiatives articulated in the resolutions. For example, General Motors, presented with a resolution to add racial minorities to its board, elected Rev. Leon Sullivan, an African American, and he subsequently launched the Sullivan Principles that General Motors endorsed.

All of these developments—the spread of business ethics courses in American and European business schools, the debate over fundamental human rights in South Africa, increasing attention to the problem of corruption and bribery, the emerging social investment movement, and the growth of nonprofit global organizations interested in business ethics—made the ethical behavior of businesses outside the United States a topic of growing concern.

Globalization becomes an economic reality

During the 1980s and 1990s it became apparent how truly global business had become. By 2005, when Thomas Friedman’s The World is Flat was published, global trade had increased dramatically from the end of World War II (Friedman 2005). By one index, global trade multiplied more than 25 times in real dollars from 1950 to 2005, and by 33 times by the economic crisis of 2008 (Ortiz-Ospina and Roser 2017). Large and even medium-sized and small companies had supply chains that reached across the globe to manufacturing firms in China, Pakistan, and Vietnam. For a time Japanese companies and manufacturing reigned supreme, and economists were touting the success of the “four tigers” (South Korea, Taiwan, Singapore, and Hong Kong) that were building global enterprises that served the world, and set their countries on the path of rapid development.

As globalization spread rapidly during the 1980–2010 period, so also did concerns for the ethics of these increasingly powerful entities called “global corporations.” The business and popular press published thousands of articles about the behavior of corporations, particularly in less developed countries.

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The growing concern for the ethical behavior of global corporations led a growing number of NGOs to follow the example set by the Sullivan Principles organization and prepare a set of principles or standards of conduct that they promoted, pressuring global corporations to sign on to these regimes or be embarrassed for not doing so. Among these were the McBride Principles on corporate operations in Northern Ireland during the “troubles” between Catholics and Protestants (see McManus 2001), as well as the conflict minerals campaign, aimed at restricting corporate purchase of minerals from warring parties in conflict zones, thereby funding the conflicts. Many NGOs were active in this campaign and, in the United States, the 2010 Dodd-Frank Act required corporate reports on the use of conflict minerals.

Perhaps the most powerful of these social movements for global ethical practice was the campaign for “responsible” supply chains. Touched off by a growing unease about the conditions under which workers made many of the products marketed in the developed world, multiple campaigns promoted standards of behavior for workplace practices, human rights, and environmental management. Impelled by the voluntary adoption of supply chain standards by Levi Strauss & Co in 1991 and by criticism of the practices of Nike Corporation, by the first decade of the new millennium, the movement had assisted in bringing about detailed standards of behavior and extensive auditing regimes (see Berliner etal. 2015).

While much progress has arguably been made in policing the working conditions and environmental impacts of global supply chains, criticisms continue to be heard. In 2013 the collapse of a poorly designed and maintained multistory building at Rana Plaza in Dhaka, Bangladesh, killed more than 1,000 workers, many producing goods for American companies and the American market. In 2014, Apple was heavily criticized for conditions in factories in China run by Foxconn, the world’s largest contract manufacturer. Critics cited worker suicides, which they claimed were due to the oppressive conditions in FoxConn’s facilities. By 2017, most global corporations had adopted supply chain standards and spent substantial sums policing their independent supply chains and conducting independent audits to convince the public that workers and the environment were well treated.

In 1999 UN General Secretary Kofi Annan delivered a speech at the World Economic Forum in Davos calling for companies to adopt sustainable and socially responsible policies and report on their implementation. In 2000 Annan’s speech led the United Nations to establish the Global Compact to promote a code of nine principles for responsible corporate behavior (see United Nations 2017). Like many other moderates, Annan believed the benefits of global trade were threatened if corporate behavior outraged groups around the world and corporations acted as if they were above or outside the law. The Global Compact Principles, which later grew to ten with the addition of an anti-corruption principle, were promoted to businesses worldwide. Interestingly, the Global Compact, which at first did not require an audit of a company’s behavior, spread rapidly in all parts of the world except the United States. United States companies were wary of incurring legal obligations by becoming signatories, though that concern faded over time. In its first ten years, the Global Compact came to require annual reports and a modest form of auditing, and disqualified hundreds of companies from membership when they did not adopt these practices. Perhaps most importantly, the Global Compact organization conducted conferences on best practices in many areas of corporate operations and ethical behavior.

The growth of corporate global ethics programs

The development of the first corporate ethics programs in the wake of the defense industry scandals of the mid 1980s led to the development of a class of corporate managers charged with managing these programs. Dubbed “ethics officers,” these managers were drawn from diverse backgrounds in human resources, organizational development, and law. Some companies, uncertain what the real responsibilities of these managers were, turned to outsiders from nonprofit or even religious backgrounds to implement these programs.

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In 1991 a group of corporate ethics officers, who had met at meetings organized by the Defense Industry Initiative on Business Ethics and Conduct and by Bentley College’s Center for Business Ethics, created the Ethics Officers Association to be their professional society. Initially housed at Bentley, the society became fully independent and was located until 2016 in the Boston area.

The appointment of ethics officers by large corporations was accelerated by the 1991 adoption of the US Sentencing Guidelines, a set of standards by which judges sentence individuals and organizations convicted of federal crimes, including violation of the many regulatory standards governing corporate behavior. These guidelines, notably, gave “credit” to companies who, though now convicted of federal crimes, had earlier implemented ethics programs. Not surprisingly, companies rushed to establish ethics programs led by ethics officers, thereby satisfying the language of the Sentencing Guidelines.

Between 1991 and 2016 the language of the Sentencing Guidelines (US Sentencing Commission 2017) became more and more explicit regarding what was considered an adequate corporate ethics program. Initial emphasis on having a code of conduct and conducting annual employee training was expanded to include emphasis on anonymous reporting systems for employees to report misbehavior, prompt and thorough investigation of complaints, top management support for ethics, the development of a culture that encouraged ethical behavior, and oversight of the company’s “ethics system” by the board of directors. A parallel effort by the Department of Justice to give guidance to prosecutors deciding whether to bring charges against corporate entities stipulated that leniency could be granted if a company had an effective ethics program. The latest version, authored by Deputy Attorney General Sally Yates, was released in 2015 (Yates 2015). Given these two incentives, corporate general counsels encouraged their firms to create ethics programs to meet the standards of both documents.

Unfortunately, a legal mindset developed in many corporations that the ethics program was aimed primarily at compliance with laws and regulations not at a broader but less defined standard of “business ethics.” Many corporate programs became “check the boxes” exercises more than an effort to create a truly effective program for motivating ethical behavior. When such programs did focus on behavior, the concerns were frequently limited to compliance and not with the broader concept. In 2005 the Ethics Officers Association, recognizing that their membership had become increasingly dominated by lawyers, renamed itself the Ethics and Compliance Officers Association. A second professional society, the Society for Corporate Compliance and Ethics, which catered initially to small and mid-sized firms and to compliance officers in government, universities, and other types of organizations, was even more compliance oriented.

While US-based companies implemented ethics programs to meet the expectations of the US legal system and its public, they also became increasingly concerned about how compliance and ethics was managed in their operations outside the US. There were two primary reasons for this increasing emphasis. First, an increasing number of US laws and regulations were applied “extraterritorially” to operations outside the US borders. An employee of a US firm located in Asia or Africa might engage in bribery that violated the domestic FCPA. The manipulation of financial accounts in a small division in another country could be prosecuted in the US as if it had occurred at the US headquarters. The second reason was that an increasing number of foreign countries had begun to adopt and enforce laws similar to some in the US, particularly in the fields of bribery and corruption. Most notably, the United Kingdom in 2010 adopted the Anti-Bribery Act, which made any firm that operated in the UK liable for bribery that occurred anywhere in the world. The extraterritorial reach of the UK anti-bribery law was even more extensive than the US FCPA.

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Efforts by US corporations to spread their own codes of conduct globally began feebly, often by shipping copies of the ethics code (frequently only in English) to country managers with written instructions to implement the codes. When this proved insufficient, companies tried other techniques, such as bringing foreign managers to the US for training in how to present the corporation’s ethics commitments in the managers’ own countries. Eventually, companies began to translate their codes into local languages. When ethical scandals persisted abroad, many companies adopted a “best practice” of having a lawyer or ethics officer from the US visit every international operation annually to conduct standardized training at least for the senior management team. Violations often persisted, and some questioned the ability of a US-based official to communicate effectively the values and standards by which the local operation with a different culture is to function. A few pioneering experiments are being conducted in 2017 to produce training programs that are both culturally sensitive to each national setting, and can be delivered by local managers with more credibility than a US-based traveling manager. One of these experiments, initiated by a Silicon Valley high tech company, combines insights from Chinese and Western ethical theory to present the company’s commitment to ethical behavior.

In general, non-US global firms have lagged in developing management systems for ethical behavior. However, as more non-US firms set up sizable US operations, they have been exposed to how US firms have proceeded and are bound themselves by the standards of the US Sentencing Guidelines. Notable scandals involving non-US global firms, including a major bribery scandal involving the German firm Siemens, and illegal marketing practices of several European pharmaceutical firms, have led to growing interest among such firms in “best practices” in managing ethics (see, for example, Watson 2013 and Barboza 2016).

Defining a global ethic for business: challenges

One of the major barriers to the further development of global business ethics has been a lack of agreement on what ethical standards should be observed worldwide. Do the same standards of ethical behavior hold everywhere in the world? Also, more practically for companies, do we operate by a single global ethical standard, or do we adapt policies to local markets?

One approach focuses chiefly if not wholly on compliance: a company’s “ethical” standards are determined explicitly by the laws and regulations the firm is obliged to follow; these would include both those of the corporation’s home country and those set forth by any government entity in which the corporation operates. This approach, which uses the concept of ethics less frequently than that of compliance, has considerable attraction for companies that find it difficult to define the concept of ethics, particularly global ethics. But the emphasis on compliance can lead to problems, especially when employees and managers interpret this focus as encouragement to meet legal requirements but nothing more. In some companies, this approach has led employees or managers to interpret the company’s wish to be, “don’t get caught violating the law.”

A second approach has been to emphasize the “traditional values” of the company from its history and seek to implement those consistently throughout its operations. This approach seeks to ground the company’s global ethics in the company’s traditions, which themselves may be reflective of the corporation’s home country. A third approach is to have a minimum set of global standards and let the local country managers interpret what the local cultural and business standards require. This “local adaptation” approach has backfired in some countries as local managers game the system to justify almost any practice.

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Since the early 1980s there has been a substantial body of intellectual and academic work directed at defining what standards a company ought to follow and what might constitute a global business ethic that could be said to apply to all firms. As noted earlier, the problem is that different cultures define ethics in different ways. The diversity of religious traditions and teachings also make the definition of a single global ethic difficult. In 1996 Thomas Donaldson published an essay in the Harvard Business Review entitled “Values in Tension: Ethics Away from Home,” arguing for a core of universal ethical values, plus a zone of “moral free space” or discretion where local cultural norms could be accommodated (Donaldson 1996). A substantial body of writings by academics, corporate executives, and NGO leaders on specific types of global corporate behavior have appeared since the 1990s. David Vogel, for example, has published analyses of consumer and environmental regulation in the global economy (Vogel 1995) and essays on food safety regulation in European countries (Vogel and Ansell 2006). Others have addressed such areas as human rights, supply chain, product safety, environmental sustainability, and relationships with governments.

The search for a single definition of global ethics began immediately after World War II. In 1948, the United Nations, traumatized by the inhumanity witnessed during the war, sought to define universally recognized human rights as one of its first priorities. A commission chaired by former US First Lady Eleanor Roosevelt produced the UN Universal Declaration of Human Rights (United Nations 1948). This document has had an outsized impact on all future discussion of global ethics. The document emphasizes so-called negative rights, that is the right to be left alone and not oppressed, but it also mentions positive rights such as education, health care, and economic security. Admittedly, these were more an aspiration than a real possibility when the declaration was first adopted. The principles and concepts in this document have been the most important and influential in the past 70 years. Succeeding United Nations documents have been designed to extend and implement the concepts in the Declaration. An extensive body of what is now called “international law” is built on the Declaration.

As noted earlier, individual religions had spoken on ethical standards with the intent that they be applicable to all, not just to the religion’s adherents. Attempts at an interfaith religious dialogue to define a single global ethic have occurred intermittently over the past 125 years. In 1893, the first Parliament of World Religions met at the Chicago World’s Fair and set a goal to encourage a dialogue among religions toward the betterment of the world. In 1993, the Parliament met for a second time, considered and adopted a declaration “Toward a Global Ethics,” primarily authored by Professor Hans Küng, a Roman Catholic theologian and ethicist (Parliament of World Religions 1993). Küng has continued to champion an interfaith global ethic through his Global Ethic Foundation. Among the successor documents is the proposed Universal Declaration of Human Responsibility, again authored primarily by Küng, and adopted and promoted by the InterAction Council, a global assembly of former heads of state and government (InterAction Council 1997).

As noted earlier, UN General Secretary Kofi Annan launched the Global Compact in 1999 to encourage companies to adopt a common set of ethics principles. Within the UN, the topic of corporate behavior became the concern of many branches and initiatives. Among the most important was an effort by the UN High Commissioner for Human Rights to define business’s role in helping governments to “respect, protect and fulfill human rights and fundamental freedom” of its citizens. The inquiry produced the Guiding Principles on Business and Human Rights (United Nations 2011). Known as the Ruggie Principles after its principle author, UN Special Representative John Ruggie, the principles call for governments to prevent companies from violating the human rights of citizens, and for companies themselves to respect the human rights of all whose lives they impact.

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We have identified two significant barriers to the further development of a global ethics commitment by companies. The first is the difficulty in defining what behavior global ethics requires of companies. Is there a single global ethic or just a series of local ethics? The second barrier is the strong practical tendency to default to compliance with multiple laws and regulations rather than adopt a broader standard of ethical behavior.

The development of a global business ethics will continue, but its advocates will have to contend with these and several other practical barriers to its evolution. Among them are:

Concluding remarks

The enterprise of global business ethics, stimulated by the dramatic growth of global trade since 1950, has made significant inroads into the practice of global management and to the teaching of business management world-wide. Colleges in India, Kenya, and Columbia have joined those in the United States and Europe in adding courses on business ethics. Even companies with little international engagement are confronting the challenges of global business ethics as they deal with companies who do trade globally.

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The success of the global business ethics effort depends on three developments. They are progress in clarifying global standards of ethics, the development of effective management systems to implement ethics commitments, and strengthening the willingness of corporate executive teams and boards to make ethics a priority.

This last factor, as of 2017, is the most troubling. There is evidence that the management of even the largest global enterprises may be willing to put aside concern for ethics when profits beckon. Three contemporary examples are particularly discouraging. The management of Volkswagen, a distinguished and successful German company, created and deployed a “defeat device” in its small diesel engines to falsify results on emissions tests conducted in the United States, and possibly in Europe. The American financial firm Wells Fargo Bank created an incentive program so manipulative that over 5,000 sales employees created fake customer accounts, often costing other customers hundreds and even thousands of dollars. Even more distressing, senior Wells Fargo executives and board members did not intervene for several years despite reports of widespread misbehavior. Finally, Takata, producer of the air bags used in most American-made automobiles, delayed revealing dangerous flaws in their product for months and even years. In a portion of air-bag deployments, the Takata product sprayed metal fragments that injured or even killed occupants. It is even alleged that some American car executives knew about the defect and failed to act to protect their customers. In each case, these scandals will cost the companies millions and even billions of dollars, damaging their reputations for years to come. The global business ethics enterprise does indeed have work to do.

Essential reading

There are several conceptual treatments of global business ethics as mentioned in this chapter. However, there is no single comprehensive treatment of best practices in the corporate implementation of global business ethics, though the reader will find dozens of short articles by consultants and commentators on the topic. Other essential documents of global business ethics include the codes of conduct outlined in the United Nations Global Compact Principles (United Nations 2017) and the United Nations Guiding Principles on Business and Human Rights (United Nations 2011). The writings of Pope Francis, particularly in his encyclical Laudato Si (2015), include the most extensive religious treatment of the obligations of business toward employees, customers, and the environment. For the reader who would like to explore the historical themes in this chapter in greater depth, there are three books worth consulting. William Sullivan and Will Kymlicka have edited The Globalization of Ethics: Religious and Secular Perspectives (2007). Frederick Bird and coauthors have produced The Practices of Global Ethics: Historical Backgrounds, Current Issues and Future Prospects (2016). Chronicling the history of corporate social responsibility and business ethics from an American experience, Kenneth Goodpaster and colleagues have written Corporate Responsibility: The American Experience (2012).

For further reading in this volume on the history of business ethics, see Chapter 1, The history of business ethics and Chapter 3, Theory and method in business ethics. On the prospects for a business ethics reflective of traditions of non-Western cultures and regions, see the chapters in Part VIII that focus on business ethics in China (Chapter 35), South Asia (Chapter 36), and Africa (Chapter 37). On the work of religious groups in civil society, see the discussion in Chapter 38, Business ethics in Latin America. On the spread of Western business ethics to nations that were once communist, see Chapter 39, Business ethics in transition: communism to commerce in Central Europe and Russia. On the work of global organizations to combat corruption and bribery, see Chapter 34, Corruption, bribery, and moral norms across national boundaries. For an examination of the Brundtland Report (United Nations) and its recommendations for a global policy on sustainability, see Chapter 22, Business, nature, and environmental sustainability. On developments in accounting and international human rights, see Chapter 31, The accounting profession, the public interest, and human rights. On the subject of norms across national boundaries, see Chapter 33, Cross-cultural management ethics in multinational commerce. On leadership and diverse groups, see Chapter 25, Leadership and business ethics. On ethics programs within the corporation (with a focus on the US) see Chapter 27, The ethics of managers and employees. On the nature of exploitation in labor relationships, see Chapter 29, Exploitation and labor.

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