Page 265 - DMGT519_Conflict Management and Negotiation Skills

Unit 12: Ethics in Negotiation

control over the situation. When managers have no influence over the situation, they must Notes
accommodate to the other culture. If important values are involved, managers should take
themselves out of the situation or not get involved.

12.12 Ethics as a Competitive Advantage in Global Business

An emerging perspective on ethics in multinational business is that ethical behaviour provides
a competitive advantage (Buller and McEvoy 1999; Litz 1996). As a competitive tool, ethical
capability is “an organization’s ability to identify and respond effectively to ethical issues in a
global context”. The elements of ethical capability are firm-specific including:
1. Knowledge and skill to understand ethical frameworks and respond effectively to cross-
cultural ethical situations;

2. Leadership, teamwork, and organizational culture that facilitate ongoing dialogue and
learning about global ethics; and
3. Human resource systems and other organizational practices that acquire, develop, and
sustain these capabilities.
Ethical capability resides in the three important organizational resources of perceiving
interdependence, thinking ethically, and responding effectively (Litz 1996). Perceiving
interdependence is recognition that a firm gains legitimacy by fulfilling diverse stakeholder
needs. Ethical thinking is the result of organizational learning created from the interaction of
diverse stakeholders and produces heightened sensitivity to ethical issues. Finally, responding
effectively is “taking the appropriate ethical action in a timely manner.”

The alignment of strategic international human resource management with corporate strategy
develops ethical capability. Human resource practices can create and sustain ethical capability
through transformational leadership, enhancing organizational learning, and implementing
specific human resource practices. Specifically, transformational leadership initiates, articulates,
and sustains an ethical vision for the corporation. Organizational learning requires that an
organization learn from its international stakeholders concerning ethical practices. Specific
human resource practices include an international code of ethics combined with appropriate
mechanisms to implement the code which requires selection of culturally competent people,
training in ethics, performance appraisal that incorporates ethical behaviour, and rewards and
recognition for ethical behaviour.
It is important to sustain ethical competencies in multinational corporations. This requires
continuous organization design which is “a process for identifying key tasks and modifying the
reporting relationships, responsibilities, and coordinating mechanisms to accomplish those
tasks”. Clear and consistent communication is also important for sustaining a shared vision of
ethics in the multinational corporation. Last, the transformational organizational leader should
create an ongoing capacity for change that includes audits of the ethical and cultural climate, a
plan for continually improving ethical capability, overcoming resistance to change, and utilizing
the resources necessary to develop and sustain ethical capability.
In summary, the idea that an organization can build and maintain ethical capability as a
competitive advantage is related to trust emerging as a value among multinational corporations.
In post-Communist Russia, ethical behaviour in business was so unusual that the revelation
made by the food company Wimm-Bill-Dann – the name is a transliteration of Wimbledon, the
English tennis tournament – in its initial public stock offering that one of its principal owners
had spent nine years in prison, and that his criminal record could hurt investors brought a
shock-wave in the country. But this honest approach resulted in raising $161 million in the
offering and made“ ‘transparency’ and ‘corporate governance’ something of a fad, at least among

LOVELY PROFESSIONAL UNIVERSITY 259