For Research : Awareness of the Important of Business Ethics

According to the above definitions of business ethics, we can figure out some reasons why multinational companies put many efforts on business ethics. Business ethics is becoming particularly significant to multinational corporations because of the context of globalization (NBCC Seminar, 2002). There are many reasons why MNCs are taking seriously in business ethics. The reasons are stakeholders’ concerns, top management’s attitude, international regulations, and the position of ethical practices.

Stakeholders’ Concerns. Stakeholders are paying more attention on business ethics toward a corporation’s performance. Stakeholders have direct effects on corporations’ activities. The results showed if the corporations or organizations emphasized more on business ethics and social responsibility, it will certainly have a significant impact on their financial performance (Verschoor, 1998).

The stakeholder model is a common model used in the analysis of corporate ethics. This model suggests that managers have to recognize the legitimate rights of the stakeholders in decision-making. Stakeholders commonly include customers, suppliers, government, financial institutions, unions, competitors, local communities, and the public (Barker & Cobb, 2000). Recently, there is an increasing number of stakeholders who start taking into account corporate ethical information because of the ethical practice they hold. Most investors do not want to get involved in any ethical issue like human’s right, corruption, discriminatory employment practices, and environmental pollution. Therefore, investors want to obtain the ethical information from a corporation’s ethical performance. The stakeholders need to know about the ethical information because it is relevant to their evaluation of the financial risks and the returns of investments (Hummels & Timmer, 2004). As a result, stakeholders’ ethical concerns of business ethics can affect corporate financial performance.

Top Management’s Attitude. Corporations’ management attitude and support are the critical elements for an organization to fulfill business practices. Verschoor’s (1997) research on management report, which mentioned about ethics showed in the management report or not, concluded that the organizations’ management report mention of ethics are performing well especially for their financial performance.

Broad of directors are responsible for supervising the performance of management and proving management’s assessment of the internal control. Senior management should understand that business ethic has become a dominant trend. Many evidences suggested that higher level of board of directors and management support on ethical practices, higher moral would reveal within an organization. For this reason, board of directors and top management need to set up compliance system that monitor employee practices and encourage employees to operate according to company guidelines to be able to lead to ethical behavior (Hayes, 2002).

In an organization, management role is always affecting most of the policies in a firm. Without the support of the top management, many company regulations and policies will not be executed successfully. Effective board of directors and top management are the ones who can establish a committee concerned with ethical behavior (The Center of Business Ethics, 1986). Board of directors and top management are the internal roles of an organization to support ethical behavior and conducts (Ibrahim, Howard, & Angelidis, 2003). Top management should understand how important of business ethics affects employees’ behavior.

Management attitude for business ethics have significant impacts on a corporation’s performance. Research studies found that if management gives full support of ethical issues, employees would follow the examples of top management and behave more ethically (Verschoor, 1998). Frederick (1992) observed that the top-level managers usually serve as models for others who work in the same environment.

Leaders of a firm setting themselves as examples will result to a higher ethical performance all the time. Therefore, top management should make more efforts on business ethics in the firm to demonstrate a good model of ethical behaviors for employees.

International Regulations. Multinational corporations usually have to respond to the external pressures such as legislative pressures because of ethical consideration in host countries (Cox, Brammer, & Millington, 2004). Investors are concerned more on corporate ethical investment than its financial performance because of the rapid-growth of business ethics (Social Investment Forum, 2002a; Sparkes, 2000; UK Social Investment Forum, 2003). For instance, international sporting goods industries have faced many ethical issues like using child labor and enforcing ethical human rights of their oversea subordinates. Social Interest Groups (SIG) establish the code of ethics for international sporting goods industries to follow. The European SIG code, the Clean Clothes Campaign (CCC) was set up in Netherlands by an association to protect children’s rights in Bangladesh, India, and the Philippines.

The reason for CCC to develop this code is to force companies to implement ethical human rights. The Asian Human Rights Commission in Asia also adopted this code. Many non-governmental organizations exert a lot of effort on the codes and try to enforce of ethical human rights in Asia (Tulder & Kolk, 2001).

The Position of Ethical Practices. The position of ethics in the same industry is also the main factor of awareness of the importance of business ethics. Some industries already set up code of conducts for their branches and oversea subsidiaries to ensure that the employees will not practice unethical behaviors. Those pioneers can build up the good benchmarks for other corporations in the same industries.

Followers will be based on pioneers’ experiences to enforce the ethical practices as competitive advantages. For example, international sporting goods industry has been a pioneer in setting up codes and offers many related experiences for others to follow (Tulder & Kolk, 2001). As a result, many organizations will pay more

attention to the ethical issues in order to pursue corporate long-term growth and profits.

MNCs can adopt ethical issues in the companies as a competitive advantage because it can help the companies to reduce worker’s compensation cost to build up their competitive advantage. Organizations can also gain greater satisfaction from employees, communities, regulators, and external stakeholders.

Competitive advantages of ethical behaviors for MNCs are good brand images, greater commitment to the employees and employees’ loyalty, excellent financial performance, and favorable reputation An increasing number of non-governmental organizations start putting pressure on MNCs to make them pay attention to the ethical issues even for their oversea subsidiaries. Several ethical issues have been discussed in International Organization. International ethical organization is trying extremely hard to ensure that MNCs do practice ethical issues such as employment practices, consumer protection, environmental protection, corruption, and basic human rights (Frederick 1991). MNCs should aware how importance of business ethics and make their best effort to fulfill ethical practices to be able the get the long-run success.