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Ethics and Finance

International Considerations

As companies extend their reach across international boundaries, ethical issues have taken a more prominent position in the discourse about the benefits of globalization. Nowhere can the legal vs. ethical divide be more pronounced than when considering international prospects, for what is legal in one jurisdiction might be illegal in another.

As different cultures attempt to work together, different values can emerge on topics such as fair wages, working hours, child labor, environmental impact, facilitating payments, discrimination in hiring or customer base, etc. Furthermore, companies might decide where to locate their workforce based on taxation, labor costs, or regulations.

Being sensitive to cultural differences is a good skill to foster, as attempting to understand the viewpoint of another party can allow for greater collaboration and increased opportunities. Being open to new views and ideas, however, is very different from accepting everything as relative.

Executives may try to explain away unethical behavior as "that's just the way they do business there." While this might be a completely true statement, this fact alone does not give a company justification for violating ethical principles. Another common trope is "if we left, another company would come in that is even worse." Choosing the best from among bad options is one thing, whereas it is very hard to support a decision on the grounds of merely being "less unethical."

Key Takeaways

  • Globalization creates new ethical considerations.

  • Cultural plays a role in ethical financial decisions.

Exercises

  1. Relocating to a key factory to another country will allow a company to reduce labor costs, allowing for greater profits and a lower cost for customers. Discuss the impact on current employees, potential employees in the new country, and other stakeholders.

  2. A government official says that company ABC's paperwork will be approved, but that it would probably take six weeks to process. With a $1,000 payment, he can see that it is done by the end of the week. The extra five weeks of productivity is worth at least $10,000 to the bottom line of ABC. What are some of the ethical considerations of this arrangement?

  3. Company DEF has a factory located in country GHI. The government of GHI has just declared that one of the byproducts that the factory emits into the local water table is now illegal. The factory requires a $10 million refit to eliminate the byproduct. As an alternative, the factory could be relocated to a neighboring country for $1 million, where the byproduct is not illegal. What are some of the ethical considerations of this situation?