Sustainable International Business Futures Essay Example
13SUSTAINABLE INTERNATIONAL BUSINESS FUTURES
Sustainable International Business Futures
Sustainable International Business Futures
International business offers an array of benefits to countries as they specialize in the manufacture and export of products that a country can produce in the most efficient way. Imperatively, governments and their agencies must ensure that they follow ethical practices and legal frameworks to reduce or prevent the occurrence of unethical and criminal activities by business enterprises, especially multinational corporations. Today, several questions have been raised concerning the activities of multinational corporations (MNCs), particularly the darker side of their operations as they seek to do business in several countries (As-Saber n.d). Using the critical scenario method (CSM), international business activities must be viewed from a firm-centric approach to addressing the social and environment issues surrounding such MNCs. Imperatively, a critical scenario method considers the future impact of such practice, particularly how these multinational corporation carry out their activities (As-Saber n.d. b). The concept of black international business offers scholars and experts an opportunity to question and investigate critical ethical issues and dilemmas that influence the sustainability of international business activities of the multinationals in the face of globalization. International business criminal activities are not new, only that these practices have changed over time, but the only constant variable has been the perpetrators; the multinational corporations in collusion with governments (Wheelan & Fink 2016). Globalisation has been a pivotal factor in making illegal international business operations more pervasive, especially giving of bribes by MNCs to win contracts in different countries, as demonstrated in the following case study (As-Saber n.d). This paper examines a case of unethical business practice.
Evaluation of ethical standards of CIMIC Group
Ethical business practices, particularly devoid of corrupt activities, are essential for sustainable international business among multinational corporations. However, the recent corruption revelations at one of Australia’s biggest contractor firms, CIMIC Group (formerly Leighton Holdings), raises questions on the ethical practices, and social and economic sustainability of international business by multinational corporations (Bachelard &McKenzie 2016). The corruption revelation at the organization demonstrates a lack of commitment by multinational corporations to uphold the best practices in their operations and entrench a pervasive culture of corruption. A critical evaluation of ethical standards at the organisation demonstrates that CIMIC has failed to carry out international best practices and to cultivate an ethical culture that abhors corruption and other unethical practices in their operations, especially as they seek to expand their activities in other parts of the world and benefit from the salient features of globalisation.
Analysts believe that the top 100 listed corporation reacted to earlier corruption allegations by changing its names and its senior executives as a way of addressing the entrenched corruption culture (Lawrence 2017). However, these efforts seem not to have bore any fruits due to the recent revelations from the organisation on bribery allegations in order to win huge contracts in India and other parts of the world. It is evident that the corporation has actively been engaged in several unethical issues that taints not only its image but also the conduct of several multinationals in the country. Firstly, stories of senior executives being involved in mega corrupt scandals in the corporation’s offshore arm have been rife, particularly before it changed its name. For instance, between 2010 and 2011, two offshore bosses Russell Waugh and Peter Cox are alleged to have commissioned or known different amounts of corruption from Unaoil, where huge payments were made to bribe Iraq officials. Secondly, the organisation’s offshore arm is accused of money laundering through an Indian shell company meant to pay bribes where invoices were backdated to cover the bosses (Bachelard &McKenzie 2016). Further, the company is said to have paid $ 15 million to guarantee its steel supply to the same money laundering organisation in India. The said amount was later laundered to Iraq. However, the company never got steel, and it was later discovered that the amount was a bribe aimed at removing a certain business obstacle in India. Its executive at the time, Peter Gregg insisted that there was no wrongdoing and threatened that he could sue anyone alleging unethical practices at the firm. Thirdly, the company is alleged to have hired without any due diligence, an Indian wheel dealer called Syann Reddy to help them secure a multi-billion coal tender in India by a CIMIC offshore subsidiary, Thiess. Mr. Reddy talked would engage the company’s managers on the need to pay close to $16 million in bribes to officials in the Indian government to help them secure the coal deal (Mulgan 2016). To ensure that they got the deal, another unethical practice occurred at the organisation as its CEO, Bruno Munro, extended his contract without the necessary procedures or approval by the shareholders.
In 2012, the company carried out an internal audit that showed massive corruption and other business malpractices at the firm. However, the damning report was concealed and a whistleblower who attempted to reveal these black business practices was sacked. Further, the company’s ethics committee and the board did not react to the sacking of the whistleblower (Bachelard &McKenzie 2016). The Indian proxy was paid a bribe of about $1.3 million to prevent further damning allegations from coming to surface. Therefore, these unethical practices exposed by Fairfax Media demonstrate that CIMIC has failed to uphold the best international business practices for multinationals. Effectively, the firm has entrenched illegal and criminal business practices that include bribery, money laundering, use of shell companies, and colluding with government officials in different countries to win contracts. The firm demonstrates the inability of corporations to stop corrupt practices in their operations, particularly in developing and emerging economies (As-Saber n.d). These practices have the potential to slow Foreign Direct Investment (FDI) and defy the need for governments and MNCs to create an ethical environment for all players when it comes to delivery of public goods to the populations.
II. Actions by CIMIC Group to restore its reputation and performance as an ethical firm; locally and internationally
Black international business practices hinder growth and development as the involved officials, especially in government, take away resources meant to offer public goods to the populations and use them as individual bribes. These corporations do not make any losses since they plough back the bribery money in form of inflated costs of public projects in such jurisdictions (As-Saber n.d). However, multinationals must understand that ethical practices are essential to their returns and reputation. A damaged reputation slows engagement with governments and other players. Paying bribes ruins economies, especially in low-income and emerging economies like India and Iraq (Székely & vom Brocke 2017). CIMIC has a corporate social responsibility to protect resources where it operates, and paying bribes implies that either the organisation is not competent and cannot competitively win contracts without bribes. It follows that the company must take necessary actions to redeem its image, both locally and internationally. The company has been involved in massive corrupt allegations including money laundering, bribing government officials in India and Iraq to win multi-billion dollar contracts, and making fictitious payments worth millions yet no goods were delivered (Lawrence 2017). It follows that the organization lacks an ethical approach to its business operations. Therefore, it must take necessary actions to redeem its reputation.
Firstly, it must respond to all these allegations and be ready to have a thorough audit of its operations and business dealings in and outside the country. Responding to these allegations include the firm’s readiness to assume full responsibility for any wrongdoing in these scandals. It must take an active role in controlling the conservation and have necessary facts to direct the debate concerning its actions (Knight 2016). More fundamentally, it must an unconditional apology to all its stakeholders. It must understand their concerns and address them as a public corporation whose activities affect millions of people around the world. The internal audit must involve an audit of personal lives of its senior executive, their roles in these underhand deals, and what they know about the alleged payments (Andrews 2014). It follows that the company must address these issues and offer answers, for instance, why its subsidiaries used shell companies to launder money from Iraq and India. Giving a comprehensive response to these allegations will allow the organization to explain its role, the role of its senior executives, and the role played by Iraqi and Indian government officials in these mind boggling scandals that have rocked the Australian corporate sector (Bachelard &McKenzie 2016). These allegations border on the company’s suspected link in perpetuating illegal international business practices that are not sustainable.
Secondly, the firm must evaluate its organisational culture and code of ethics among for its employees, especially the senior executives. Ethics and social corporate responsibility are essential elements in international business (As-Saber n.d). Multinationals like CIMIC have an ethical and corporate responsibility to carry out practices that have minimal impact on the social, economic, and environment structure in communities where they have operations. Multinationals need legitimacy by conducting their activities in the most ethically and legally appropriate way. While some practices may be legal, they remain morally questionable (Andrews 2014). Therefore, MNCs must balance these aspects and have practices that are not only legitimate but morally acceptable in all communities across the body. The organization must ensure that it has effective code of ethics and conduct that define its business processes and nurtures integrity when dealing with governments and other corporations
Thirdly, the company must nurture transparency and a culture of accountability for its employees. According to Sheila Bonini and colleagues (2008), while reputations are built on perceptions, transparent and consistent deeds are essential. Stakeholders want to see these perceptions supported by real, practical and consistent ethical business activities. They posit that relying too much on lobbying and geopolitical influence cannot help organisations remain sustainable in the global business environment, but transparent actions are critical and the building blocks of a sound long-term brand image and reputation (Bonini et al. 2008).
III. Need for an over-haul of Australia’s anti-corruption law to make MNCs more ethically responsible and compliant
The recent mega scandals involving Australian multinationals in and outside the country demonstrate the need for an over-haul of the country’s anti-corruption law. As noted in her article, Elizabeth Knight says that too many Australian “smoking guns” engaged in international corruption and bribery. However, despite the massive evidence of the current cases, no comprehensive convictions have been carried out by the state, territorial, and the federal government. Perhaps this may be a pointer to weak anti-corruption laws that let the offenders off the hook easily (Knight 2016). For instance, individuals holding public offices have been implicated in scandalous dealings where foreign bribery and corruption have thrived.
The allegation exposed by Fairfax Media’s investigative writers indicates an entrenched corrupt environment that involves huge and well-known corporations in the country, for instance, the CIMIC Group (Hoy 2014). The dubious dealings at the organisation through its senior officials demonstrate an urgent need to review the existing laws that have failed to produce any meaningful conviction despite reliable media exposés. Secondly, separate allegations against the engineering giant Worley Parson that it used corrupt agents to get government contracts in oil-rich and producing countries are enough to have a review and possible over-haul of these laws.
The country’s anti-corruption enforcement record is considered one of the worst by the OECD reports. The OECD on several occasions has questioned Australia’s ability to deal with offshore corruption allegations against its multinationals, particularly in getting contracts. Many legal experts and international economists believe that the Australian government was not only been complacent but inconsistent in dealing with foreign corrupt practices by its MNCs (Bocken et al. 2014). As a result, the country’s anti-corruption perception index continues to decline in as many as one can recall. It follows that the existing legal frameworks have failed to robustly tackle the problem and assure investors that they won’t be associated with firms that do not carry out international best practices.
Most experts believe that the Australian Federal Police is under-resourced to address the complexity and amount of the potential cases. Further, they posit that the country does not have an adequate infrastructure to enforce its anti-corruption law by pointing out the existing overlap between the DPP office and the Justice Department that has occasioned procedural inefficiencies in the system. It suffices that the existence of such factors raises the need for an overhaul of the system. Sustainable international business can only thrive in an ethical and legitimate environment that values the benefits that trade provides for the general population and not few individuals.
Australia has failed to comprehensively deal with bribery by its multinational firms. As posited by Greg Hoy (2014), only one case has ended in prosecution out of the over twenty-seven referred to the Federal Police. Australia must understand that it is a signatory to the international anti-corruption conventions and needs to act to protect international business. The need to have a different approach to tackle corruption cannot be overemphasised, especially at a time when many firms are doing business with some of the most corrupt countries, where corruption is not treated as a crime but a cost of doing business. Many believe that the country has been complacent on foreign corruption (Mulgan 2016). They posit that the country requires a clear and strong approach to anti-corruption legislation to address the corruption challenge. The mismatch between the federal agencies like the Australian Securities and Investments Commission and the Federal Police must be addressed through a comprehensive legislative framework with necessary prosecutorial powers to arrest and prosecute both corporate and individual players, particularly senior managers in such organisations. Without an overhaul of the system, Australia’s commitment to international business practices and need to tackle black business will be questioned (Lawrence 2017). It must attempt to review not only federal laws but even state and territorial legal frameworks in addressing the problem.
It suffices to note that sustainable international business and its future depends on the deliberate efforts by all stakeholders to improve the business environment by promoting best practices. Ethical business practices are essential because multinationals have a moral responsibility to consider the impact of their operations and activities on these populations. Illegal international business practices are not new. However, attempts to address these unethical practices are not only relevant but very important in the long-term, for both corporate players and governments. The CIMIC scandals demonstrate the need for MNCs to have ethical code conduct and an organisational culture that values ethics in its operations. Employees within such entities must focus on creating customer value instead of carrying out unethical practices that have the potential to damage their reputation and brand image. The corruption allegations against CIMIC must be investigated and take full responsibility in its efforts to build reputation, both locally and internationally. It must create a code of ethics and conduct to guide its employees on how to conduct international business transactions. Further, it must condemn and abhor any attempts to influence the outcome of its international business deals, particularly through corruption. Finally, governments have a huge responsibility in addressing these illegal business practices through their legislations and enforcement agencies. Imperatively, the Australian government must review and overhaul its anti-corruption efforts to tackle the massive foreign corruption by its multinational corporations.
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