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Do the Right Thing

Business ethics aren't the same everywhere, so stay on the right side of the law.

Are ethics absolute or are they contextual? How you answer that question is key, particularly if you work internationally. Western societies, grounded in the philosophies of Aristotle and Plato, are most likely to say absolute. Their Asian counterparts, however, generally say that determining what is ethical depends on the situation. This dichotomy means international associates may violate your company's code of ethics or even the Foreign Corrupt Practices Act without realizing anything is amiss.

In Confucian societies, for example, "sometimes it's OK to cheat or steal, as long as it doesn't disturb social harmony by presenting a problem for the family," explains George Haley, author of The Chinese Tao of Business: The Logic of Successful Business Strategy and director of the Center for International Industry Competitiveness at the University of New Haven.

Adhering to that logic, however, can create major problems for companies with international operations. As Columbia Business School professor Ray Fisman points out, "Different countries have different attitudes toward compliance and different ways of doing things." For example, in developing countries in particular there's a great temptation to use bribes--sometimes called facilitation payments--to expedite normal business processes like clearing goods through customs or processing government forms. Legally, it's a gray area, but it can lead to other woes.

Although the Foreign Corrupt Practices Act allows facilitation payments, using these may lead to shakedowns later. Seastone LC chairman and CEO Warren Osborn, 43, just says no. In working with thousands of companies during his 20 years' experience in China as owner of Seastone and founder of various other companies, Osborn says, "we make sure all partners we work with know we won't tolerate that."

Based in Provo, Utah, Seastone monitors suppliers' operations but also tries to understand local culture. Osborn is fluent in Mandarin and spends a considerable amount of time in China. He further minimizes the risk of ethical conflicts by carefully screening potential suppliers. He may evaluate 50 percent of suppliers, but only choose one or two, he says. He's learned that choosing companies that have already worked successfully with Western firms results in smoother relationships because they understand Western expectations.

Nonetheless, it's still important to spell out every detail of your dealings with foreign firms and the expectations of all parties, Osborn says. "We begin by establishing the ground rules--including the ethical rules that are critical to us--one on one, verbally," he says. Those rules are detailed in the written contract, too. Such meticulous attention helped earn Seastone's gift card accessories and packaging company more than $17 million in 2007.

Gail Dutton is a freelance writer in Montesano, Washington, specializing in business and technology.

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This article was originally published in the May 2008 print edition of Entrepreneur with the headline: Do the Right Thing.

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