Leading Ethical Practices Across Cultures

“Local sales people say clients are accustomed to expensive gifts and entertainment, beyond our policies and potentially bribery.”

Trust“We’ve encountered ‘elastic truth’ in this project. Can we trust them?”

“We’re hiring in Country X, are there specific COI (Conflict of Interest) issues to include in employee orientation?”

Ethical dilemmas occur for us all, but when crossing cultures the “right behavior” can be fraught with ambiguity, differing legal systems, loyalty and duty to friends/family, fears, and ignorance or misunderstanding of concepts that are challenging to translate.  “Open communications and a willingness to raise difficult issues are more critical ethics determinants than knowing whether there is a helpline,” says behavioral ethics specialist David Gebler. Leading ethical practices globally can be done with a formula of Understanding + Application + Monitoring.

Understanding: Ethics is based on values, and knowing the values and context shared among employees is the right starting place for common understanding.  For example, employees in Vietnam may experience strong family pressure to hire relatives, a norm in business. In India, have you heard of “off the record compensation”?

Ashok Mathur shares an illustrative example in India. Prior to the economic liberalization that occurred in 1991, India had punitively high income taxes and low ceilings on managerial income. As a consequence, many organizations compensated management by giving them tax free perquisites and sometimes “off the record compensation”. These practices, from an American perspective, would be unethical and even illegal. Even though the business environment in India has changed, and it is not necessary to compensate management using dubious compensation practices, the tradition continues in many organizations, and is not regarded as unethical. It would be prudent for multinational organizations to discuss all aspects and limits of compensation, have leaders role model company ethics, and be vigilant to ensure that traditional compensation practices do not creep into their India organizations.

Application: After “understanding” policies, even taking tests in online training on compliance, employees don’t always make the connection to real ethical dilemmas, and may continue unethical practices (copying intellectual property, asking for kickbacks from suppliers, falsifying receipts, etc.)  At Charis we have found employees “get it” when trained with realistic scenarios, specific to their country and job role, then engaged in discussions to examine the ethical dilemma from a different points of view, including the organization’s stance. The legal (local and U.S. Foreign Corrupt Practices Act) and company consequences are made explicit. Areas we have helped clients with include Conflict of Interest*, Intellectual Property, Financial or Expense Reporting, Kickbacks, Falsifying Records, Hiring of Relatives, and Discrimination – from various cultural aspects.  Once unethical behavior has occurred, there are benefits to having an outside 3rd party consultant who can gain the trust and respect of the group, conduct interviews with confidentiality, deliver ethics training in the local language, and report the suggestions of the employees back to leadership to build more open communication and avoid future infractions.

Monitoring: Don’t wait for a crisis! Support ethical behaviors with channels of communication and monitoring systems that show leaders are serious about ethics. Some best practices for leaders include:

  • Lead with personal commitment, and share stories of how you have dealt with ethical dilemmas
  • Be fully informed of the local laws and traditions where you are operating
  • Investigate and address unethical behavior swiftly and fairly
  • Use written tests for hiring positions (avoid hiring based on loyalty) and change tests frequently
  • Provide Per Diems instead of reimbursed receipts
  • Institute a “Help line” to report grievances or violations anonymously
  • Enforce consistent expense reporting practices, with questionable receipts not reimbursed
  • Discuss ethics regularly with subordinates, explore team members’ challenges

We do our employees, colleagues and business partners a service by discussing how we will “do the right thing” from a culturally informed position. While it helps to get things in writing, most cultures want to hear what you believe, and watch how you operate in challenging situations. Listen with openness, check assumptions, and be aware of the limitations to your flexibility.  Leaders can support success by their commitment to integrity, personal responsibility, honesty and fairness, and convey this in clear policies in the local language with consistent fair monitoring.