Local Culture Influence On Business Ethics

3. 8. 2021

Business ethics - many of you already know this is a critical topic. It brings up many challenges in the working environment that you and your employees have to face daily. How can you use it as a tool to act responsibly in your organization or business? Let’s take a look at that. 

There are many definitions of ethics out there. In this case, the most important for us is the definition of corporate ethics: Business ethics examines ethical principles and moral or ethical problems that can arise in a business environment.” 

Business ethics

Companies use it as a tool to make sure managers, employees, and senior leadership always act responsibly in the workplace, both with internal and external stakeholders. It is no surprise it applies to all aspects of business conduct. It is relevant to the behavior of individuals and entire organizations. Business ethics may feel like a delicate subject, a conversation that can wait when compared to other more seemingly pressing issues (a process for operations, hiring the right workers, and meeting company goals). Companies and their employees routinely try to balance ethical behavior with business interests. There is no surprise some ethical requirements for businesses are regulated by law: environmental regulations, the minimum wage, restrictions against insider trading, etc. 

Being ethical in business can be quite challenging, but why? Here are just a few reasons:

  • The “cost” of being moral is sometimes very high.
  • The decisions are complicated.
  • The competition is intense.
  • There is the tendency to rationalize the behavior: “That’s how it’s always been.”
  • There is a human tendency to cover up or deny inevitable mistakes.
  • Moral sensitivity is lower than ever.
  • There is a lot of cognitive dissonances: resistance to accepting evidence contrary to what we think.
  • Individualism predominates in business as well: everyone has their hidden agenda and their values.

How do we define culture?

Culture consists of various layers, and we often compare it with an onion. What is a part of one particular culture?

  • Symbols (food, logos, colors, monuments)
  • Heroes (public figures)
  • Rituals 
  • Values (broad preferences for a particular state of affairs)

Culture is an umbrella term that encompasses the social behavior and norms found in human societies equally just as the knowledge, beliefs, arts, laws, customs, capabilities, and habits of the humans in these groups.

What are organizational culture and the cultural effect?

The organizational culture influences the way people interact. The context within which knowledge creates the resistance they will have towards concrete changes, and ultimately the way they share (or the way they do not share) knowledge. The business operates within at least two cultures: 

  • organizational culture
  • the broader culture

There is no way ethics and culture could work apart. Culture affects how local values influence global business ethics. There are differences in how much importance cultures place on specific ethical behaviors. The collective cultural factors impact how a person perceives an issue and the related correct or incorrect conduct. 

Even within a specific culture, individuals have different ideas of what constitutes ethical or unethical behavior. Each professional is affected by the values, social programming, and experiences he/she has absorbed since childhood. There is a difference between ethical behavior and standard practice. For example, it may be acceptable to discriminate in certain cultures, even if the people in the society know that it is not proper or fair. Should a company operate on the principle of “When in Rome, do as the Romans do?” Or adhere to the ethics of the company’s home country? Should the company bribed local officials, a practice that is common in some countries? With increasingly diverse domestic, global markets and the spread of consumerism, corporations consider the ethical implications of globalizing their business operations. It is because their values challenge the reality of the cultures of other countries. 

When a company attempts to establish itself in a new environment, along with the national culture and organizational culture, a third culture comes into play. Sometimes, business ethics do not align with the ethics of the national culture. The organizational structure should drive ethical behavior. 

The impact of religion on cultural ethics

Values-based on religious teachings have influenced our understanding of ethical behavior. Western thinking and philosophy have had extensive influence on the world in the last few centuries. And global business has been heavily impacted by them. These include Reformation and post-Enlightenment values, which place focus on equality and individual rights. In this mode of thinking, it has become accepted that all people in any country and of any background are equal and should have equal opportunity. 

Companies incorporate this principle in their employment, management, and operational guidelines, but enforcing it in global operations can be tricky and inconsistent.

Bribery and its role in business ethics

Bribery remains widespread in many countries. People may not accept it, but they do take it as a necessity of daily life. But we have to be careful as we don’t all have the same understanding of the bribery concept and its effect on our local culture. How do we distinguish between gift-giving and bribery? Gift-giving can be used to establish or pay respects to a relationship. Bribery is the practice in which an individual would benefit with little or no benefit to the company, usually paid to win a business deal. On the other hand, gift-giving is more likely to be ingrained in the culture and not associated with winning a specific business deal. 

Gift giving is not routine in Western countries, such as the United States, except during the winter holidays. Even then, gift-giving involves a modest expression. Businesses operating in these cultures send humble gifts or cards to their customers to thank them for business loyalty in the previous year. Some industries, such as finance, even set clear legal guidelines restricting the value and type of gifts. In Asia, gift-giving is so ingrained in the culture. Particularly in Japan and China, it is formalized and structured. There are specific guidelines for gift-giving. It depends on the origins of the giver or recipient, the length of the business relationship, and the number of gifts exchanged. Much care is given to the appropriateness of the present as well as to its aesthetic beauty. Despite the existing guidelines, gift-giving in Asian countries, such as Japan, has occasionally crossed over into bribery. 

Asians tend to take a very different view of accountability than most Westerners. It is not uncommon for Japanese CEOs to resign to apologize and take responsibility for their companies’ practices, even when they did not personally engage in the offending practices. It has become an accepted managerial practice to preserve the honor of the company. Changing the cultural process of gift-giving is an evolving process. It takes time, government attention, and more transparency in the awarding of global business contracts.

The role of corruption in business ethics

The practice of using connections to advance business interests exists in just about every country in the world. However, the extent and manner in which it is institutionalized differ from culture to culture.

In Western countries, connections are viewed informally and sometimes even with a negative connotation. In contrast, Asian, Latin American, and Middle Eastern cultures value connections and relationships and view them quite positively. Acquaintanceships are considered essential for success.

For instance: An employee works at a firm that wants to land a contract in China. A key government official in China finds out that she went to the business school that his daughter wants to attend. He asks her to help in the admission process. Should she? Is this just a nice thing to do, or is it a potential conflict of interest? It is a gray area of global business ethics. A company may declare this inappropriate behavior, but employees may still do what they think is best for their jobs.

Management and culture ethics

Local culture impacts the way people view the employee-employer relationship. The culture affects how people see the role of one another in the workplace. For example, gender issues can impact local perceptions of women in the workplace. There are no clear social rules preventing discrimination against people based on age, race, gender, sexual preference, handicap, etc. That applies to many cultures. Even when there are formal rules or laws against discrimination, they may not enforce it. The common practice may allow people and companies to act under local cultural and social customs.

For example: Would a senior officer of an American company send a woman to Saudi Arabia or Afghanistan to negotiate with government officials or manage the local office? How do companies handle local customs and values for the treatment of women in the workplace? In theory, most global firms have clear guidelines articulating antidiscrimination policies. In reality, worldwide businesses routinely self-censor. Companies often determine whether a person can be efficient in a specific culture based on the prevailing values. 

Corporate social responsibility in business ethics

In today’s understanding of Business Ethics, Corporate Social Responsibility is an undisputable part of it. The local culture has a significant impact on the comprehension of Corporate Social Responsibility. Its implementation in the business world can act as a multiplier or as a limitation. Different views on key CSR issues cause challenges and create immense pressure for companies from the Western world. 


Today’s international business ethics deals with issues of conducting business in situations. Business ethicists suggest a middle ground that is in keeping with the United Nations Global Compact. The Compact encourages companies to:

  • honor human rights
  • accept collective bargaining
  • disallow slavery and child labor
  • care for the environment
  • avoid corruption such as bribery and extortion

Ethical decision-making in a global context requires a broad perspective. Business leaders need to know themselves, their organization’s mission, and the impact of their decisions on local communities. They also must be open to varying degrees of risk.

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