Creating the New Standards of Global Business

22 Feb. 2012 | Comments (0)

Business has become one of the primary players in structuring the global economy and, by extension, global governance. This places new demands on business leaders. As global leaders they have new, not always welcome, responsibilities, and one of these is recognizing that their actions are forging global norms. Consider corruption, probably the most powerful example of this leadership challenge.

Not so long ago, businesses were merely expected to conform to the laws and regulations of the countries in which they operated. In states where there were efficient governments that represented the will of the public, this worked fine. But as business became more global, spreading to emerging and developing markets in pursuit of cheap resources and labor, corporate leaders entered countries with weak institutions, bureaucracy and corruption. While distasteful, many businesses took a "when in Rome" approach and quietly engaged in bribery and other shady business practices that were the norm in the respective country or region. Some corporate leaders even argued that it was a question of values. Who were they to impose the values of their home market on another country? That would be ethical imperialism.

That view has given way to a new reality. There is a growing recognition among global leaders that every decision they make — whether in the name of business efficiency or setting organizational culture, or what have you — either reinforces existing practice or changes it in some way. Thus each decision represents an opportunity to forge new global standards of practice and to make these explicit.

With corruption, many business leaders feel like it is something forced on their organization by unscrupulous politicians. But there is both a supply and demand side to corruption. You cannot have a market without both. And business is the supply side.

Every decision to engage in corruption is reinforcing a corrosive and impoverishing practice. Every decision to resist corruption is an effort to forge a new norm for global business.

Many business leaders have begun to dedicate their organizations to this new norm and fight corruption. This is not easy and requires well-thought-out strategies, but many global leaders see it as an investment in the future. Corruption robs a company of the assets it competes on, like the quality of its product, the efficiency of its customer service and its reputation and brand equity. Corruption replaces these with a greased palm. Thus fighting to make anti-corruption a global business norm is a fight to protect the company's assets and its future.

Corruption is just one example of these new standards being forged by global business leaders. Human rights, environmental protection, workplace equality and important related issues, are all implicit in the decisions of executives. More and more global leaders are recognizing this and accepting the responsibility that comes with it — but there is still a long way to go.

This post is part of the HBR Insight Center, The Next Generation of Global Leaders.

This blog first appeared on Harvard Business Review on 2/13/2012.

  • About the Author: Gregory Unruh

    Gregory Unruh Gregory Unruh is professor of global business at Thunderbird School of Global Management and director of the Lincoln Center for Ethics in Global Management. He is coauthor, with Ángel Cabrera, …

    Full Bio | More from Gregory Unruh

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