Ethical Dilemmas

Dec. 21, 2004
Global manufacturers grapple with the right choices when operating across cultures.

Navigating the boundaries between right and wrong can prove tricky for companies that operate in several nations and across cultures. Should a U.S.-based company obey strict American environmental laws when operating in developing countries without similar laws? Does a European corporation follow the same safety procedures in Morocco that it does in France? And how does a company collect on bills owed by people who are struggling to feed their children? These tough ethical questions, and others like them, swirl through executive suites of the world's largest manufacturers. And companies have developed a variety of ways to address them. In the U.S. a growing number of corporations are establishing an office of ethics. United Technologies Corp. has one. So does Boeing Co. Maria Eitel grapples daily with ethical issues at Beaverton, Oreg.-based Nike Inc., where she serves as the vice president of corporate and social responsibility. When she joined the sneaker giant in 1998 it was under attack for its labor and environmental practices in developing nations. She turned negative publicity into an asset and used it to spur action. "There's nothing better than a good crisis to get your act together," she told attendees at a global leadership conference earlier this year. In an effort to generate enthusiasm for making social responsibility a regular component of the athletic-footwear company's culture, Eitel targeted managers known to have the ear of Nike Chairman and CEO Philip Knight and polled them to discover their passions. When one admitted to an interest in volunteering, she invited him to lead the company's volunteer effort. "It was kind of Machiavellian," Eitel admits. But the scheme worked. "Now he's excited about our volunteering work," she says. Eitel also solicited nominations and volunteers from all company segments -- geographic, rank, and gender -- for such philanthropic programs as creating a foundation or establishing a labor standards policy. "The idea was to get people excited not because they heard about [social responsibility] from management, but from the people they worked next to," she explains. Franco-Belgian conglomerate Suez Lyonnaise des Eaux operates in more than 120 countries, offering private infrastructure services that range from electricity and waste treatment to water and natural gas. Executives there also worry about the right ways to handle ethical dilemmas. "If [President and CEO Grard Mestrallet] has a hard time falling asleep at night, it would be because he is worrying about an environmental catastrophe, people dying," says Franois Jaclot, senior executive vice president and executive board member. Paris-based Suez Lyonnaise is well aware of the potential for catastrophe: The company operated a concession to distribute water to people living in a large municipality on the Pacific Rim, where it urged local water officials to add a piece of equipment to their system to help eliminate water pollution. Suez Lyonnaise says the officials neglected to do so, and in 1999 a water contamination crisis erupted. "No one died, but in the papers we were shown as the bad guys even though we had asked for that piece of equipment," says Jaclot. Equally challenging is the waste business. In certain countries the industry is controlled by local monopolies that are accountable to no one, explains Jaclot. In cases such as these the Franco-Belgian conglomerate faces a tough choice -- operate like an unaccountable monopoly and make money, operate according to company ethical codes and probably lose business, or stay out of the region. Sometimes staying away is the only choice. "There are some places, such as Nigeria, where it is not so easy to do business because of a lack of regulations, so we are not doing business there," Jaclot says. In other cases involving a lack of national regulations the company collaborates with multilateral institutions that can monitor working or environmental conditions. Suez Lyonnaise also created an ethics charter in 1997 following a series of mergers. The company saw the need for a set of notions shared by all employees. The charter relies on European values such as respect for the environment but also attempts to respect local conditions. "We try to act in each country [where] there are laws regarding ethics according to those laws. Where there are no laws, which is often the case, we stick to the French way," Jaclot explains. The company also operates a corporate university located halfway between Brussels and Paris where it cycles employees through classes that teach its ethics charter.

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