Unethical globalization - Essay Example

Unethical globalisation 2009 Outline: A) Introduction: general overview. B) General discussion BAE Systems: Company 2) Ethical issues in BAE Systems business conduct; 3) Unethical issues overcoming: advantages and disadvantages. C) Conclusion. Foreword: This research paper presents an overview of ethics of globalisation. On the example of BAE plc ethical issues of global company and the ways of unethical practice overcoming will be discussed. Thesis: The process of globalisation can lead the company into abuse of power thus causing bribery and allegations. Being global calls any company for high responsibility and Code of Ethics observance. Introduction Modern society is interconnected on different levels. Ventures and businesses shifted from domestic and national markets to other markets globally thus increasing the mutual connection of different markets. Globalisation influenced not only development of international trade, but also cultural exchange. Advantages and disadvantages of globalisation is a question high on the agenda today. Proponents of globalisation emphasize on upgrading of developing countries living standard through employment and technological innovations. Opponents claim that national sovereignty is lost under pressure of 'global monsters'. Nevertheless it is undisputable that globalisation allows wider interconnectedness of markets and opportunity for consumers to buy a greater assortment of goods and services. Unfortunately reap fruits can not all the parties involved. Intolerant behaviour of multinationals absorbs developing businesses through unlawful actions and measures like in the robber-baron age. Ethics of globalisation depends on different economic, social issues and in making an attempt to discuss this phenomenon, we'll try to make a brief overview of globalisation itself and then project our discussion on marketing area on the example of BAE plc. Process of globalisation will be discussed in terms of variety of institutions, conventions and norms in order to define relationship between ethics and the market globalisation (Machan, 2001). On the one hand globalism leads us to a single society. Nevertheless globalisation lies in terms of various interconnected societies which are different due to their domestic institutions, laws and norms. The real question is whether globalisation can be ethical if the latter operates between and across societies rather than within a society. Dunning (2003) claims that outcomes of globalisation can vary from 'brutal' to 'utopian', but what is more important is the extent to which global corporations can be associated with medieval barons and commanders; or whether this imitation will be reformed at the global level as the global economy turns into a utopian state in which different co-operative and innovative post-national institutions appear to successfully transform the world. Consequently understanding the scope of globalisation ethics of a global corporation can be problematic (Sullivan, 2002). This field is characterized by such concerns as corporate management, accurate accounting, fair labour payments and environmental issues. Thus our research is made in terms of aforementioned concepts on the example of BAE plc. This corporation was chosen not in vain, but due to the fact that their ethical issues were recently updated and level of globalisation was modified. BAE Systems: Company Description BAE Systems headquarters in the UK and is a premium contracting and systems incorporation company providing potential across the land, sea, air, space, and command and control sectors (BAE Systems). In accordance with average statistics BAE Systems international markets produce annual sales of some 18,260 million U.S. dollars and employ world-wide more than 90,000 people (BAE Systems). Furthermore in accordance with Hurst (2004) and his study ethics indicators of BAE failed in compliance with their "a stand alone CSR report", which lacks four business ethics policies and discusses only their corporate governance structure and how they comply with the Combined Code issued by UK's Listing Authority. In order to analyze global unethical issues we should determine the level at which this mistake occurred. In accordance with Derryberry (1999) BAE Systems like other businesses supposedly acts on four levels of globalisation. The first level when the company achieves multidomestic market allows company to have several independent units operating in different countries with little mutual cooperation. On the second level an international company headquarters in one country and manages branches in different countries. Therefore a risk of home country bias on other markets and makes no effort to integrate into the global economy. The third level of globalisation is characterized by a transnational company organization, which operates separately integrated business units in different countries. Thus local needs of operations in each country are taken into account by the company. BAE Systems reached the fourth level of globalisation, i.e. a truly global company. It's an optimal level for global company, because the world becomes a single market and company's actions are directed on various operations around the world. Though it's the hardest level for any global company, we can surely claim that BAE reached it and further on we'll try to find out ethical failures of the company. Thus ethical improvement started on the fourth level of company globalisation. Consequently the company started updating its ethical issues and turned into the only aerospace and defence company in the example that shows some concurrence with CSR. In their separate CSR report BAE reflected strong education initiatives and compliance of all major manufacturing sites with international environmental management standard, ISO 14001, which is atypical to aerospace and defence industry (Hurst, 2004). Woolf Committee had to define high ethical standards to which a global company should adhere on the example of BAE Systems plc and suggest some measures necessary for such standards achievement. At this point we should memorize significance of reputation for ethical business conduct to any modern company, what is more important a global company, especially for global defence company. Under these circumstances in 10 years BAE Systems plc has turned from a UK- based and export driven business to its current position of the prime global defence companies (Hurst, 2004). Ethical issues in BAE Systems business conduct Issues of unethical globalisation disappeared due to high standards of ethical business conduct, necessary for companies in any industrial area willing to succeed globally. Corporate reputation is a guarantee of enterprise's value; successful management of ethical and reputational risks has become an important element of corporate authority (Kline, 2005). For example, reputational damage of BAE may not influence business performance at once, but once it happened; it will surely undermine general performance over the medium to longer term, due to potentially severe disruption of senior management, the risk of lawsuits and devastation of internal morale. Hurst (2004) suggests that unethical issues of the defence company are caused by peculiar complications and restrictions that imply ethical and reputational risks. Therefore company has to resist to openness and simplicity; reluctance to set and act in terms of high standards if these are not set by law, and a lack of reliability in standards of business conduct across countries and cultures. Consequently in order to exist in compliance with high ethical standards in business, BAE accelerates the rate of progress; assures higher standards of ethical business conduct; and tries to match the benchmarks set by global companies in other industries. Furthermore in accordance with other data presented by TI's 'Defence against Corruption' team (2008) BAE Systems is accused of corruption and bribery by US officials. This deal turns around a huge arms deal between BAE and Saudi Arabia. Of course, BAE Systems denies this damaging information, which spoiled its image. This investigation is a perfect example of how it is necessary to build the culture and infrastructure of the company to address the challenges facing global industry. Therefore reputation of the company can be damaged due to ethical failures. BAE Systems case is a perfect example of global company misbehaviour, which is discussed in Woolf Committee Report reviews in detail. The case is focused on corporate culture and business ethics as saving measures to prevent harm from reputational or ethical errors. TI's 'Defence against Corruption' team report (2008) presents 23 recommendations for reforming ethical business culture at BAE Systems. Risk managers of the company can find this report not novel, but there is no doubt that the recommendations promoted by Lord Woolf's Committee can be a starting point for improvement of corporate ethics programs in the UK and even globally. Further on we'll make a brief overview of the recommendations, but one of them requires more profound reflection. The fourth recommendation, which claims that: "The Board should develop its increasingly proactive role in ensuring high standards of ethical business conduct in all the Company's activities" (TI' report, 2008). Detailed discussion of this goal completion through five specific steps should be focused on ethical risk management process. Therefore BAE chooses best ways to advance its globalisation lawfully and with respect to moral and social values. Unethical issues overcoming: advantages and disadvantages Globalisation of the company step by step becomes ethical. Practical skills of the company's employers and employees allow company to be a leader in terms of standards of ethical business conduct among global companies. BAE protects their own ethical standards on the background of openness and transparency. The Company's Internal Audit function ensures that ethical business and the management of reputational risk are properly evaluated. Different local companies, representatives of the company, comply with BAE's global code and equivalent standards and associated policies and procedures. Further recommendations with aforementioned ones can be combined into a list of hints concerning ethical globalisation achievement for any global company (on the example of BAE Systems). Code of ethics in BAE was updated in May 2008 in Woolf report, which underlined particular importance of transparency for the company. These recommendations turned into Transparency International UK review, which "is to offer proposals to BAES and to the Ministry of Defence on ways that they might follow up the Woolf recommendations so as to have most effect" (TI' report, 2008). Some areas, more global, concerning UK Government and the Ministry of Defence, are omitted in Woolf report. Criticism of the latter by TI-UK emphasizes on the following: first and foremost is a stronger statement requiring disclosure of advisers (Heineman, 2007). For example, to call only for a 'general presumption' of disclosure (in accordance with Recommendation 11) is not worth much attention, and diminishes from what was if not a good set of recommendations on advisers. Consequently practical overcoming of unethical issues lies far beyond the Woolf Recommendation. Consequently there is a certain separation of confidence placed by the Woolf Committee on the Non-Executive Directors (NEDs) to supervise the company's ethical failures in comparison with mistake to have undertaken the role hitherto (Hurst, 2004). In compliance with recent recommendations NEDs play a vital role for company fair management thus it must be underlined by the Woolf Committee. However stained reputation of current NEDs prevent them from these roles performance. Thus the only way out for BAE is to hire NEDs that guarantee objective confidence, which can be proven by track record, or make all the NEDs to take part in leadership behaviours trainings. Global company actions smoothes sharp corners and provocative issues of the Saudi contracts. However globalisation must call for additional attention and scrutinized conducting of negotiations and other measures taken. To be global is to have immense power and authority, making a sample for imitation. Consequently we believe in BAE transparent business and new 'Al Salam' contract concluding as critical. BAE decreases pricing of the new contract as against purchases made by the RAF in its turn though these actions are not remedy for restoring confidence in the business conduct of BAE Systems and the stained reputations of the UK and Saudi Arabia governments. Reputation renewal in compliance with TI-UK review can be also reached by further issues consideration which was not discussed in Woolf Committee report (2008): supervision of political donations and travel costs; funding; internal relationship with staff members and stakeholder consultation. Therefore additional recommendations of TI-UK to the UK Government and the MOD such as stronger cooperation between government agencies and BAE, stricter rules on the shift between corporate executive post holding and civil servant positions, enhanced by clarity of government to government contracts and on the part of MOD, a more practical and mutual approach to defence industry reform are saving measures not only for BAE Systems, but also for different global companies who lost their image due to unethical behaviour and tactics. As far as we can see globalisation implies constant interconnection and mutual communication not only of various countries and their economies, but also of companies and even governments. Ruling institutions should be aware of responsibility and take into consideration potential damages of their reputation due to inobservance of laws and code of ethics. 'Unethical globalisation' must disappear even as a term for these notions' incompatibility. All companies have the potential to be multinational, but for this purpose they should 'think locally and act globally.' Conclusion Therefore we considered ethical issues of global company and convinced of that with regard to different economic and social factors BAE Systems failed to a certain extent. Fortunately the way out for the company was found in the Woolf Committee report and TI-UK review. Process of globalisation is considered to be not an evil, but a great opportunity for development and prosperity. Nevertheless being tempted by power and fame even global companies can make mistakes. Saudi contracts blackened BAE reputation but proper actions and attentive attitudes towards all deeds of the company were saving remedy for global defence company. BAE example is a bright illustration that it's all in the timing. Furthermore we were assured in the process of research that being global implies not only power and wealth, but also responsibility and hard work. Consequently the process of globalisation can be supported but only in case when it is a main force in global economic growth. The former process should have moral and ethical limits and create an optimal balance in any business on different levels. Modern world offers great opportunities for all kinds of businesses and fair deals can bear fruits. Some regions, like Saudi Arabia search investors and are inspired to integrate into the global economy deeper. Business deals of BAE with this country are essential in case if businesses, government leaders and employees realize advantages of global markets. Generally the question of globalisation evokes a lot of debate, but ethical issues are often omitted. Multinational corporations should take care more of their images and brands and avoid ethical failures, bribery and allegations. Code of ethics in BAE is an evidence of company image renewal on the background of stained reputation. Due to constant innovations in Woolf report transparency and clarity of business conducting for BAE are the most essential ethical issues. Ethical recommendations were also complemented by Transparency International UK review, which made code of BAE ethics more versatile. Though BAE reputation renewal can be challenged, we are sure that updating of company ethics is a great relief in global companies' trust. BAE plc is a global company, which is able to admit its guilt, become better and more responsible. Being a participant and a legislator of globalisation itself, BAE improves its politics making a step to optimal scale and limits of globalisation around the world. Political stability, profitable economic management, and educated employees guarantee absence of corruption and bribery. In the process of research we were convinced of the fact that the concerns of ethical and unethical issues overlap to create a complex mesh of problems for globalisation. Further on BAE can't be viewed as the company trying to impose their values on other small companies. Risk management and ethical issues observance is wrenchingly complex for any company but are vitally important. Therefore the research paper gives a brief overview of new proposals to BAES by Woolf recommendations and TI-UK, which, fortunately, raised ethical standards in BAES and diminished harm of corruption on company image. Bibliography 1. Machan, Tibor. (2001). 'Why globalisation is good - some reflections on the ethics of globalisation'. Global Business and Economics Review, Vol. 3, No.2, pp. 186 - 199. 2. BAE Systems. (2004). [Internet]. Available from http://baesystems.com/. Accessed 10th March 2009. 3. Hurst, Nathan E. (2004). 'Corporate Ethics, Governance and Social Responsibility: Comparing European Business Practices to those in the United States'. A study conducted for the Business and Organizational Ethics Partnership Markkula Centre for Applied Ethics Santa Clara University. 4. TI's 'Defence against Corruption' team. (2008). Analysis of the Recommendations of the Woolf Committee TI (UK). 5. Dunning, John. (2003). Making Globalization Good: The Moral Challenges of Global Capitalism. Oxford, England: Oxford University Press. 6. Derryberry, Jennifer. (1999). 'What It Really Means to Go Global.' Sales and Marketing Management, December. 7. Sullivan, Jeremiah J. (2002). The Future of Corporate Globalization: From the Extended Order to the Global Village. Quorum Books. 8. Kline, John M. (2005). Ethics for International Business: Decision Making in a Global Political Economy. Routledge. 9. Heineman, Benjamin W. Jr., Heimann, Fritz. (2007). 'Arrested Development: The Fight against International Corporate Bribery'. The National Interest, Volume 92, p.80. Read More