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CCM/U5 Topic 1 Understanding Significance of Cultural Values & Ethics in Cross Boarder Businesses

Every transaction is influenced, if not determined, by culture values: it takes place within culture.  Culture is the water in which we fish swim.  But when we find ourselves in a process with persons who are not “us”, not Americans, not New Yorkers, not Parisians or Milanese, just “not us”, the issue of culture looms larger,  presents more interesting challenges and has the potential to play a much greater role in the process and results. From the first phone call between two people to how smoothly the process will go to whether the “deal” will ultimately hold together—culture values is a key determinant.

Beyond the culture values which every individual brings with him or her, there is another “culture values”: the culture of nations and institutions, which certainly can effect the deal process—from the view of some nations that certain industries or certain companies are part of the nation’s patrimony and therefore subject to different and often unwritten rules, to the role of labor unions in corporate governance, and even in the United States, the inter-agency committee CFIUS which makes determinations about “national security” and its role in prospective deals, which one might argue are more cultural than legal.  These issues will not be the focus of this paper, but the shadow of this broader culture does extend to much of the discussion.

Even if there were widespread cross-cultural agreement on the normative issues of business ethics, corporate ethics management initiatives (e.g., codes of conduct, ethics telephone lines, ethics offices) which are appropriate in one cultural setting still could fail to mesh with the management practices and cultural characteristics of a different setting. By uncritically adopting widely promoted American practices for managing corporate ethics, multinational businesses risk failure in pursuing the ostensible goals of corporate ethics initiatives. Pursuing shared ethical goals by means of culturally inappropriate management practices, in short, can undermine the effectiveness of ethics management efforts. This article explicates how several important dimensions of culture can influence the effectiveness of common ethics initiatives, and recommends the development and application of a culture-structure contingency analysis in the task of encouraging ethical behavior in global businesses.

Some cultural norms influence business strategies, such as:

  • Relationship expectations
  • Preferences for products and services
  • Perception of external businesses and local ethics

To avoid confusion about ethics in global businesses, it is suggested that businesses take three steps to help guarantee their companies’ employees behave appropriately and ethically:

  1. Develop a clearly articulated set of core values as the basis for global policies and decision-making. Companies must align its decisions with its values. The most shared values are honesty, dignity, responsibility, and respect for others. And when working with other cultures, it is important to recognize differences in values.
  2. Train international employees to ask questions that will help them make business decisions that are both culturally sensitive and flexible within the context of those core values. Companies often have training and policies that teach employees its ethics code. And while formal legal protection may be a necessity for businesses, it’s important to consider how these policies are supported by leadership within the organization.
  3. Balance the need for policy with the need for flexibility or imagination. Companies should establish an approach that is flexible but robust with guiding the employees to exercise responsibility and make a good professional judgment.

Clients and coworkers may have a different perspective on ethics and proper behavior than those to which you are accustomed. When I went to school in Russia, for example, I was told to not voice my opinion. But when I moved to U.S., I learned I was able (and encouraged) to share my own views. These cultural differences may seem trivial to some, but helping your team understand and value how clients and peers in other countries approach work can help bridge these cultural gaps, and ultimately, improve your chances of succeeding in the global marketplace.

The global business environment is constantly changing and becoming more diverse. We can no longer assume that our own values and ethics are the only “right” way to approach business relationships with other countries. By helping your organization appreciate the differences between cultures, you will help your employees better understand how to best approach their work as your company scales globally.

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