UNIT 7

Ethics and Decision Making

Overview

Good business results are based on good decisions. The basis upon which decisions are made
reflect on the company’s code of conduct, or its system of ethics. The activities that companies
decide to be involved with are determined by the leaders’ focus on what is important for the
business; in many cases this includes the company’s impact on society. The current concern that
all businesses and the general public have for ethical behaviour and social responsibility spans
global companies as well. In today’s business world, companies operating globally must be
concerned with how they carry out their business and their social impact in those countries. But,
before making any such decisions, the very approach to decision-making must be observed, as
it is heavily influenced by national culture and other variables.
In this Unit, we examine the topics of ethics and corporate social responsibility in the
international arena, and include a discussion on how different cultures approach decision-
making, providing models for an effective process, based on the culture(s) in question.

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Learning Objectives

By the end of this Unit you will be able to:

1. Define the importance of ethics in cross-national management.
2. Identify potential ethical issues in global management.
3. Discuss the impact of national culture on decision-making style.
4. Outline models for cross-cultural decision making.
5. Outline the importance of Corporate Social Responsibility (CSR) in global business.
6. Ascess the benefits of CSR to companies operating cross-nationally.
7. Examine the various ways that CSR can be practiced.
This Unit is divided into three sessions as follows:
Session 7.1: Ethics Across Cultures
Session 7.2: Corporate Citizenship and Social Responsibility
Session 7.3: Cross Cultural Decision-Making

Reading and Resource

Required Readings
Punnett, Betty Jane. (2015). International Perspectives on Organisational Behaviour and
Human Resource Management. Ro utle d ge Taylo re & Francis Gro up , Lo nd o n and
Ne w Yo rk . p. 263-285.

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Session 7.1

Ethics Across Cultures

Introduction
What is right and what is wrong? What compass guides our ideals about what is helpful or
harmful in a professional setting? This is a question of ethics in business—which extends
beyond what many of us may consider a ‘religious’ topic. As we have discussed in previous
units, different cultures subscribe to a different system of beliefs, values, and ideals—which can
cause conflicts of opinion in a cross-national context.

The Need for Ethics in Cross-National Management

Ethics is the study of morality and standards of conduct (Hodgetts et al, 2005).
Ethics is important in the study of cross-national management, because ethical behaviour in one
country can be viewed as unethical in another. As we have learnt throughout this course,
culture impacts considerably on the behaviour of individuals and groups. Therefore in business,
the concept of "good behaviour" is not universal, but depends on culture. Therefore, to be
successful in cross-national management, global managers must be aware of the influence of
cultures upon ethical standards in business.
Ethical scandals and questionable business practices have received considerable media
attention, raising questions about the ethical nature of practices in cross-national business
(Hodgetts et al, 2005). As a result, a growing number of companies operating globally have
formulated codes of ethics to guide their behaviour and ensure that their operations conform to
these standards worldwide (Hodgetts et al, 2005).
Some popular ethical dilemmas include:
• Political and Business Scandals
Þ giving and accepting bribes
Þ unethical and illegal practices, e.g. one Japanese motor company admitted to
concealing customer complaints for over 20 years, while senior management was
aware
• Hostile Work Environment Issues
Þ E.g. sexual harassment in the workplace
• Equal Opportunity Issues

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 Þ Status of female managers
Þ Equal opportunity across races and religions
• Piracy, Counterfeiting, and Industrial Spying Problems (Hodgetts et al, 2005).

The following excerpt by Lewis (2006) shows how ethics are perceived across different cultures:
“Members of most cultures see themselves as ethical, but ethics can be turned upside down.
The American calls the Japanese unethical if the latter breaks a contract. The Japanese says it is
unethical for the American to apply the terms of the contract if things have changed. Italians
have very flexible views on what is ethical and what is not, which sometimes causes Northern
Europeans to question their honesty. When Italians bend the rules or “get around” some laws or
regulations, they consider they are less ideal-bound than, say, the Swiss, and cut actually closer
to reality. They do not consider themselves corrupt or immoral, nor do they admit to illegality.
There are many grey areas where “shortcuts” are, in Italian eyes, the only intelligent course of
action. In a country where excessive bureaucracy can hold up business for months, currying
favour with an official is a matter of common sense.”

One study surveyed managers from the US, France, and Germany, who were asked to respond
to a series of five ethical situations related to coercion and control, conflict of interest, the
physical environment, paternalism, and personal integrity. Summing up the responses of
managers to all five scenarios, the researchers concluded that the American managers were
noticeably more concerned with ethical and legal questions. Their French and German
counterparts appeared to worry more about maintaining a successful business posture
(Hodgetts et al, 2005).
According to Hodgetts et al (2005), this shows that global companies must be aware that the
ethical practices of their home country may be quite different from those of countries where
they do business.
Reasons for these differences include:
Þ personal values
Þ incentives (for behaviour)
Þ legal restrictions
which all differ from country to country and culture to culture (Hodgetts et al, 2005).
As part of a global economy, businesses operating cross-nationally also need to be aware of the
impact of their operations not only on the organisation, but on the society and country in which
they operate. The global manager is faced with this challenge, as well as attempting to unify
business standards across the nations participating in the international business venture.
How can the global manager seek to solve ethical dilemmas and act in a manner that is
beneficial to all involved? Is there a universal code of ethics?
According to Punnett (2015), there are no rules to apply in all situations. The best advice for an
international manager is to think carefully about the implications of any ethical decision, and
consider all of the stakeholders and how they will be affected. Make the decision then that
leaves one with a clear conscience.
Let us read on to see how this can be put into practice in cross-national management.

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 Punnett, Betty Jane. (2015). Internatio nal Persp ectives o n Organisatio nal
Behavio ur and Hum an Reso urce Managem ent. Routledge Taylore & Francis
Group, London and New York. p. 263-285.

LEARNING ACTIVITY 7.1

Ethics Across Cultures
Learning Recap:
In your learning log, answer the following questions:
1. What are some of the ethical issues that can arise in cross-national
business ventures?
2. How is the role of women in the workplace perceived in 2 different
cultures (of your choice)?

Session 7.1 Summary

Ethics is the study of morality and standards of conduct. It is important in the study of cross-
national management, since ethical behaviour can vary among countries and cultures. In recent
years, political and business scandals, incidents highlighting workplace inequality, and other
problems have arisen, drawing attention to the need for companies to act in an ethical manner.
Global managers should think carefully about the implications of any ethical decision, and
consider all of the stakeholders and how they will be affected. Next, we will discuss the topic of
corporate social responsibility in a cross-national context.

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Session 7.2

Corporate Citizen and Social

Responsibility

Introduction
Businesses can be viewed as ‘citizens’ of a country, from the perspective of having rights and
responsibilities. We call them ‘corporate citizens’, and like individuals, they must adhere to
specific ethical codes and principles. At present, corporate citizens are under increasing
pressure to contribute to the societies and communities in which they operate, and to adopt
more socially responsible business practices in their entire range of operations (Hodgetts et al,
2005).
Corporate citizenship, more commonly known as corporate social responsibility, is important
for companies whether they operate only in one domestic market or cross-nationally. Let us
explore this topic in further detail.

What is CSR and why is it important?

Corporate social responsibility (CSR) can be defined as the actions of a firm to benefit society
beyond the requirements of the law and the direct interests of the firm (Hodgetts et al, 2005).
‘Beyond the requirements of the law’ means that there is no legal obligation for a firm to engage
in social responsibility, but there are certainly societal and governmental expectations that
companies support the interests of the society and country in which they operate.
Many global companies in the recent past have come under close scrutiny as a result of recent
ethics scandals and the general public’s concerns about the lack of corporate responsibility
(Hodgetts et al, 2005). Pressure for greater attention to CSR comes from a range of stakeholders,
including civil society (the broad societal interests in a given region or country) and from non-
governmental organisations or NGOs (Hodgetts et al, 2005). These groups urge global
companies to become responsive to the social needs of the country in which they operate, e.g. in
developing countries, companies need to be aware of improving working conditions,
environmental impact, and the like.
CSR efforts span the company’s contribution to sustainable economic development, working
with employees, families, and the local community to improve their quality of life. It is an
opportunity for companies to integrate economic, social and environmental concerns in their
business operations (Odete, 2013).
The increasing global nature of the marketplace is multicultural, providing a spectrum of
different expectations regarding the company’s role and responsibility in society. In a global

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market, different cultures will emphasize different values. What is important to one culture at
one time may not be important to another culture, and these values may affect both the role that
institutions assume within society and what society expects of those institutions. If values are
different across cultures, these differences in values certainly will be reflected in attitudes
toward CSR (Odete, 2013).
CSR starts with a company’s value system and a principled approach to doing business. This
means operating in ways that, at a minimum, meet fundamental responsibilities in the areas of
human rights, labour, environment and anti-corruption. Responsible businesses enact the same
values and principles wherever they have a presence, and know that good practices in one area
do not offset harm in another (UNGC, 2004).
According to the World Business Council for Sustainable Development, expectations placed on
a company’s CSR include the following:
• Expectation of stakeholders that companies should behave ethically;
• Expectation that business should contribute to economic development;
• Expectation that business should improve the quality of life of its workforce and
their families;
• Expectation that business should play active part in the improvement of the society
Odete, 2013).
CSR certainly impacts on a company’s financial bottom line, but for good reason. CSR benefits
business performance in numerous ways, including:
1. Differentiating oneself from competitors
2. Enhancing the company’s influence in the industry
3. Enhanced relationship with stakeholders
4. Media interest and good reputation
5. Attracting, retaining and maintaining a happy workforce
6. Increasing customer base
7. Winning new business (Odete, 2013).

Response to Social Responsibilities & Expectations

Global companies are increasingly engaged in a range of responses to growing pressure to
contribute positively to the social and environmental progress of the communities in which they
do business. One mechanism is agreements and codes of conduct in which companies commit
to maintain certain standards in their domestic and global operations. These agreements (e.g.
the UN Global Compact) provide some assurances that when companies do business around
the world, they will maintain a minimum level of social and environmental standards in the
workplaces and communities in which they are doing business (Hodgetts et al, 2005).
The United Nations Global Compact is a principle-based framework to encourage companies
worldwide to adopt sustainable and socially responsible policies, and to report on their
implementation. The UN Global Compact is a call to companies to align strategies and
operations with universal principles on human rights, labour, environment and anti-corruption,
and take actions that advance societal goals (UNGC, 2004).

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The UN Global Compact spans ten principles as follows:
• Hum an Rights
Businesses should:
Þ Principle 1: Support and respect the protection of internationally proclaimed
human rights; and
Þ Principle 2: Make sure that they are not complicit in human rights abuses.
• Lab o ur Stand ard s
Businesses should uphold:
Þ Principle 3: the freedom of association and the effective recognition of the right to
collective bargaining
Þ Principle 4: the elimination of all forms of forced and compulsory labour;
Þ Principle 5: the effective abolition of child labour; and
Þ Principle 6: the elimination of discrimination in employment and occupation.
• Environment
Businesses should:
Þ Principle 7: support a precautionary approach to environmental challenges;
Þ Principle 8: undertake initiatives to promote environmental responsibility; and
Þ Principle 9: encourage the development and diffusion of environmentally
friendly technologies
• Anti-Co rrup tio n
Þ Principle 10: Businesses should work against corruption in all its forms, including
extortion and bribery.
By incorporating the Global Compact principles into strategies, policies and procedures, and
establishing a culture of integrity, companies are not only upholding their basic responsibilities
to people and planet, but also setting the stage for long-term success (UNGC, 2004).
Recognising how important social responsibility is to their customers, many companies now
focus on and practice a few broad categories of CSR (Post, 2017):
1. Environmental efforts: One primary focus of corporate social responsibility is the
environment. Businesses regardless of size have a large carbon footprint. Any steps
they can take to reduce those footprints are considered both good for the company
and society as a whole.
2. Philanthropy: Businesses also practice social responsibility by donating to national
and local charities. Businesses have a lot of resources that can benefit charities and
local community programs.
3. Ethical labour practices: By treating employees fairly and ethically, companies can
also demonstrate their corporate social responsibility
4. Volunteering: Attending volunteer events says a lot about a company's sincerity. By
doing good deeds without expecting anything in return, companies are able to

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 express their concern for specific issues and support for certain organisations (Post,
2017).
In the case of pharmaceutical companies and access to AIDS medications, a number of
companies initiated or expanded alliances with NGOs, such as Doctors Without Borders and
Oxfam, helping the companies deliver drugs to the target populations (Hodgetts et al, 2005).
Hewlett-Packard has initiated a series of “i-communities” in economically deprived areas such
as the town of Kuppam in the state of Andhra Pradesh, India. These communities use
public/private/NGO partnerships to enhance economic development through technology.
NGOs promote the projects and enlist community support. HP is able to use the projects to
build markets, test products, and expand global marketing knowledge. The experience provides
HP with valuable knowledge of how to identify and negotiate with rural customers, which
positions it to improve its ability to do business in rural markets of India and other countries in
the future (Hodgetts et al, 2005).

LEARNING ACTIVITY 7.2

Corporate Social Responsibility
In this Session, the social responsibility actions of companies were discussed.
One global company committed to social responsibility is Johnson & Johnson.
Visit their website, http://www.jnj.com/, and jump to the sections: “Our
Societal Impact” and “Our Credo”.
Answer the following questions in your learning log:
a. Which stakeholders are most important to J&J and why?
b. What are the main areas of social responsibility activities for J&J, and how
do they relate to the credo?
c. What do you think the social impact of these activities will be for the
countries in which J&J is operating?
d. How can J&J ensure that its operating companies adhere to the credo and
commitment to social responsibility?

Session 7.2 Summary

The world has become more concerned about companies being socially responsible and acting
in the best interests of societies to which they belong. Global companies are becoming more
proactive about incorporating CSR activities in addition to their main operations, for a
multitude of benefits, including improved business performance. A guiding framework for
companies looking to implement CSR is the UN Global Compact principles, which span ten
principles to encourage a culture of integrity and fulfilment of the company’s responsibilities to
people and planet. Next, we will discuss how decisions are made in a cross-cultural context.

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Session 7.3

Cross-Cultural Decision Making

Introduction
How decisions are made, how long they take to be made, and how final they are once made are
all factors that depend on the cultural groups involved in the very process of decision making.
In global business, the reality is that a person’s style of making decisions depends on his/her
cultural background, values, and beliefs. Therefore, decision making is culturally contingent,
and in each step of the decision-making process culture influences the ways global managers
and team members make decisions (Podrug 2011).

Influence of National Culture on Decision-Making Style

In addition to one’s national culture, a person’s decision-making style is determined by a
number of elements, including:
• individual characteristics, e.g. age, education, level in hierarchy
• organisational variables, e.g. industry, technology and organisational culture
(Podrug, 2011).
Global companies are full of decision-making teams, such as board of directors, executive
committees, management groups, project teams, etc. With team members having different
cultural backgrounds, what is a rule of thumb for finding a decision-making approach that will
work for everyone? Essentially, the global manager should ensure that the decision making
approach fits both the organisational culture as well as the dominant national business cultures
of the members in the team (Toft, 2015).
Global corporations have different corporate decision structures, e.g. Coca Cola Corporation is
well known for its top-down decision making approach where a few people at the top decide
how to run the company. Other companies have a more consensus-driven or bottom-up
approach (Toft, 2015).
The foundation on which the decisions are taken will also vary in companies, e.g. some prefer to
make decisions based on a large number of explicit facts, in a pre-agreed formal decision
process. People from the Anglo-Saxon/Northern European business cultures such as UK,
Germany, Scandinavia or USA have a tendency to prefer this approach (Toft, 2015).
Others prefer to make decisions in a more implicit and intuitive manner, with the most
important focus being on building rapport and establishing strong working relationships
between the parties. When it is decision time, there is a tendency to have a less formal decision
making process and sometimes decisions are taken outside the formal setting. People from
Latin/Southern European business cultures such as France, Spain, Italy and certain South

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American countries often lean towards this approach (Toft, 2015).

Cross-Cultural Examples of Decision-Making Styles

• Americans love making decisions because they usually lead to action and
Americans are primarily action oriented (Lewis, 2006)
• The French love talking about decisions, which may or may not be made in the
future. If their reasoned arguments do not produce what in their eyes is a logical
solution, then they will delay decisions for days or weeks if necessary. French
negotiators seldom reach a decision on the first day (Lewis, 2006)
• The Japanese hate making decisions and prefer to let decisions be made for them
by gradually building up a weighty consensus. In their case, a decision may take
months. This exasperates Americans and many Northern Europeans, but the
Japanese insist that big decisions take time. They see American negotiators as
technicians making a series of small decisions to expedite one (perhaps relatively
unimportant) deal. Once the Japanese have made their decisions, however, they
expect their American partner to move like lightning toward implementation
(Lewis, 2006)
• Mediterranean and Latin American teams look to their leader to make decisions
and do not question his or her personal authority. The leader’s decision making,
however, will not be as impromptu or arbitrary as it seems (Lewis, 2006)
• This contrasts strongly with the Anglo-Saxon and Scandinavian willingness to
modify stances continuously during the talk if new openings are perceived
(Lewis, 2006)
• Once a decision has been made, the question then arises as to how final or
binding it is. Anglo-Saxons and Germans see a decision, once it has been entered
into the minutes of a meeting, as an oral contract that will shortly be formalized
in a written, legal document. Ethically, one sticks to one’s decisions. Agenda
items that have been agreed on are not to be resurrected or discussed again
(Lewis, 2006)
• Neither Japanese nor Southern Europeans see anything wrong, ethically, in going
back to items previously agreed on. The French show lack of respect for
adherence to agenda points or early mini-decisions. Latin imagination will spawn
clever new ideas, uncover new avenues of approach, improve and embellish
accords that later may seem naïve or rudimentary. For them a negotiation is often
a brainstorming exercise. Brainwaves must be accommodated! Italians, Spanish,
Portuguese and South Americans all share this attitude (Lewis, 2006).

Approaches to Decision-Making
1. “The executive club”: This model works best when the corporate culture is top-down
driven and when most of the members already have a good intuitive view on what
the solution should be. Examples of situations where this model can be very effective
are: Defining a new organisational structure or setting management compensation
schemes in a small top management team (Toft, 2015).

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 2. “The control tower”: This model works best when the corporate culture is top-down
driven and when most of the members in the decision group prefer explicit validated
facts. The decision making process is characterised by quickly gathering an objective
decision foundation and then swiftly deciding what to do. Examples of situations
where this model can be very effective are: Managing the merger of two companies
or overseeing a large restructuring (Toft, 2015).
3. “The court room”: This model works best when the corporate culture is bottom-up
driven and when most of the members in the decision group prefer a highly factual
decision basis. Situations where this approach can be impactful are, e.g.: Defining a
large operational improvement program where strong execution buy-in is needed or
a preparing for a multi country procurement program (Toft, 2015).
4. “The coalition”: This model works best when the corporate culture is bottom-up
driven and when most of the members in the decision group have strong subjective
views on what the company should do. Examples of situations where this approach
can be successful are: Defining a model for sharing sales leads in a multi-local
business group or defining a knowledge management practices (Toft, 2015).
While each of the models can be extremely effective in the right circumstances they can also be
almost destructive when used in the wrong context (Toft, 2015).

LEARNING ACTIVITY 7.3

Cross-Cultural Decision-Making
Match each of the four models of decision-making above to the national
cultures mentioned in the ‘Cross-Cultural Examples of Decision-Making
Styles’. In your estimation, which cultures follow which decision-making
model approach? Record your answers in your learning log.

Session 7.3 Summary

The impact of national culture on decision-making is significant. It is critical for global
managers to be aware of the different styles of decision-making, and utilise an approach that is
most beneficial to the team and organisation. This will support the global manager in helping
teams and the organisation become more successful at reaching its objectives.

Unit 7 Summary

In this Unit, we discussed the role and need for ethics and corporate social responsibility in
cross-national management. These considerations form the basis for making good business
decisions. We have also discussed the impact of national culture on decision making, and
proposed models for good decision-making based on the prevailing culture in question.

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References
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Lewis, R. (2006). Wh e n Culture s Co llid e : Le ad ing Acro ss Culture s. Nicholas Brealey

International. Retrieved from http://www.utntyh.com/alumnos/wp-
content/uploads/2011/11/When-Cultures-Collide.pdf

Odete, P. (2013). Cro ss-cultural Co rp o rate So cial Re sp o nsib ility. Polytechnic Institute of
Bragança, Portugal. Retrieved from
http://economicas.unileon.es/files/2012/11/Leon_maio_2013.pdf

Podrug, N. et al. (2011). Influence of National Culture on Decision-Making Style.

Retrieved from https://www.degruyter.com/downloadpdf/j/jeb.2011.6.issue-
1/v10033-011-0004-0/v10033-011-0004-0.pdf

Post, J. (2017). What is Corporate Social Responsibility? Retrieved from

http://www.businessnewsdaily.com/4679-corporate-social-responsibility.html

Punnett, Betty Jane. (2015). Inte rnatio nal Pe rsp e ctive s o n Organisatio nal Be h avio ur and
Hum an Re so urce Manage m e nt. Routledge Taylore & Francis Group, London and
New York.

Toft, O. (2015). Making Decisions in an International Management Team. Retrieved

from
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United Nations Global Compact. (2004). Retrieved from

https://www.unglobalcompact.org

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