In a panel discussion, “Ethics Through Different Lenses,” presented by the Thunderbird Honor Council, three Thunderbird professors reflected on the role, importance and application of ethics in international business. The panelists were Mary Teagarden, Professor of Global Strategy, Mary Sully de Luque, Associate Professor of Management, and Jonas Gamso, Assistant Professor of International Trade.
Here is an overview of some of the questions and viewpoints shared during the 90-minute session, which can be viewed on Facebook.
Why should businesses be ethical? What do they gain?
Professor Teagarden said this is one of her favorite questions because businesses are basically social organizations. If they don’t behave ethically their reputations suffer, and people – customers, suppliers, and employees – stop doing business with them. Companies that develop bad reputations can’t attract top talent or loyalty from customers, and they’re left to work with inferior talent and smaller market share.
Building on that sentiment, Professor Sully de Luque added that an ethical culture within an enterprise isn’t just about attracting top talent – it’s about retaining talent, too. She argued that if employees begin to sense that a business has begun to waver from an ethical path, people who are ethical will start to leave. The advent of Corporate Social Responsibility (CSR) is a competitive advantage for companies to attract and retain talent, and it allows both talent and management to benchmark competitors against each other.
“Setting and maintaining ethical standards helps global businesses attract and retain top talent. Ethics is good business.” – Click to tweet
Should ethical principles be applied equally across all business activities?
Professor Gamso argued that there are certain universal principles that should be applied across businesses, both for the benefit of workers and the health of the company. Labor rights and occupational health and safety standards not only protect employees, they ultimately reduce transaction costs and help reduce catastrophic events. But, Gamso added, while “universal principles are important, resources have to be distributed efficiently,” in successful corporations.
Professor Teagarden followed on that thought, “You have to treat people with dignity, but there’s room for flexing.” She told the story of an energy company that was competing for a contract with a foreign government. A key official had demanded a $200 million bribe, and the company knew that its competitors paid bribes to win business. This presented a quandary over whether to prize ethical purity over winning important business. Ultimately the company adopted a flexible solution and offered to invest an equivalent value in a local fertilizer company if they won the contract. Rather than make the offer behind closed doors, they publicized it in The Wall Street Journal. “Was that an ethical solution?” asked Teagarden. “The key is to look at whether the benefit accrued to an individual or the community.”
“Was that an ethical solution? The key is to look at whether the benefit accrued to an individual or the community.” – Click to tweet
Teagarden shared a personal anecdote from early in her career. In the course of working the nightshift in a lab, she became aware that a colleague was skimming money by charging for 16 tests when the correct process was to consolidate them into one. When she confronted her colleague, he responded, “What difference does it make, Social Security pays for it anyway.” She promptly fired him and made sure his licenses were revoked so he wouldn’t repeat the same behavior at another lab.
In contrast to that (and more humorously), Teagarden recalled her time as a 20-year old employee for Sunkist and an episode with 60-year old colleague Johnny Johansson. While overseeing production of a vat of orange juice, Johnny dropped his teeth into the vat and, flush with embarrassment, confessed the mishap to young Miss Teagarden. Faced with a compromised product, and missing teeth, she opted to scrub the batch, retrieve the teeth, and report to the USDA that the sugar and citric acid mixture had gone astray. Was this ethical perfection? Perhaps not, but “Johnny got his dignity back,” consumers got clean OJ, and the USDA was none the worse for wear.
To blow the whistle or not?
Lighter instances of ethical rectitude aside, Teagarden said deciding to be a whistleblower is “a very personal decision. You have to look at a wide variety of issues.” She recalled an instance where companies were dumping toxic waste in a California neighborhood and some residents were afraid to join the protests because of reprisals. “When you assess whistleblowers, you have to be sensitive to the personal dimension,” she said. “I’ve been a whistleblower 3-4 times in my career, which probably says more about my personality. I’ve seen incredible retaliation against whistleblowers.”
Professor Gamso echoed the point, adding that whistleblowers “can lose jobs” and “face blows to their reputation. They have to weigh short-term issues against long-term issues.” They have to “weigh the problem and how serious it is” against the personal consequences whistleblowing can have.
“Whistleblowers have to weigh the magnitude of the ethical violation against the personal consequences whistleblowing can have.” – Click to tweet
Professor Sully de Luque advises potential whistleblowers to use all the resources at their disposal. “Often there is an ombudsman or an ethics hotline. Try to see if there are other people experiencing the same problems. These days, it’s easier. There’s more transparency. One way to gauge if it’s worth (reporting something) is whether you are benefitting personally, because when it gets found out, you’ll be accountable.”
Being ethical is easier than it used to be
One positive impact of globalization has been harmonization of ethical practices. Child labor and other major violations gave rise to corporate social responsibility and the United Nations Global Compact, which established global norms for ethical behavior. These norms spread up and down the supply chain when companies realize they can’t do business with major corporations unless they adhere to recognized standards, said Gamso. Consumers have a role as well. “They have a big part to play in demanding high standards from companies.”
“One positive impact of globalization has been harmonization of ethical practices.” – Click to tweet
There are still plenty of challenges out in the jungle of global business, the panel agreed. For instance, labor violations remain too commonplace. But Professors Gamso, Sully de Luque, and Teagarden all agree that steering an ethical course is much easier than it used to be.