Developing Middle East Reserves

With the opportunity that exists for CII to increase its market share by expanding its oil division into the Middle East, there are many factors that need to be taken into consideration. Some factors include the short and long term benefits and risks and requirements by national and international agencies that govern trade and business operations, both in the United States and abroad. Further, factors such as employment practices, environmental policies, and human rights standards that exist within the host country must be contemplated. The decision must be made as to whether or not CII will operate within its current code of ethics, maintain its current corporate culture, and how corporate social responsibility will be handled when operating abroad.

When doing business in foreign countries there are agencies that CII must familiarize itself with. One such agency is the International Network for Compliance and Enforcement (INECE). A global network working toward the enforcement of environmental requirements around the world, both regulatory and non-regulatory, INECE aims to steer toward compliance with that which promotes global sustainability (INECE: Overview, n.d.); the International Labor Organization oversees labor standards throughout the world, promoting social justice (About the ILO, 2009); the World Bank, namely the IDA aids in the management of environmental and natural resources and invest in the development of the private sector of developing countries (The World Bank: About Us, 2008); the United Nations works closely with the international business community with a focus on the environment, human rights and humanitarian affairs, development, and international law, to name a few (Welcome to the United Nations, n.d.). All of these organizations, among others need to be familiar to CII as laws and regulations that exist in countries abroad must be known in order to conduct business within the laws and standards of these nations.

Other than the most obvious opportunity that exists for increased profitability and market share and lower wages and profit taxes, the short term benefits to such expansion also include the reduced risk of trade sanctions due to political unrest as well as a diminished need for alliances with these nations which have historically created an impetus for war (Liuzzo, 2010). Long term benefits to such expansion include increasing earning potential of citizens of the host country, therefore their material lives, and becoming an ally of the country's economic development, promoting sovereignty. Resource owners also profit in third world countries in the way of land and building rentals, further advancing the host country's economy (Ahiakpor, 1992).

The risks that exist by doing business in the Middle East cannot be overlooked, however. Foreign businesses are often at the mercy of the government of the host country. In order to exercise control over multinational corporations, some countries attempt to control these companies through such acts as expropriation whereby the title to the company's assets are taken by the government with compensation being given; confiscation is the act of taking the title to all assets without compensation; and domestication is when a mandate exists requiring citizens of the host country to maintain partial ownership of the foreign company (Liuzzo, 2010, p. 505). Moreover there is risk of political unrest and terrorism, as well as corruption. It is not uncommon that payments be required by individuals in order to secure a business within certain countries. In the United States, this equates to bribery, but is an expectation in other nations. With the Foreign Corrupt Practices Act that exists in the United States that makes payment in order to influence a government official of another country unlawful, the penalties may not be stringent enough to discourage such acts (Liuzzo, 2010).

Already having experience operating in Siberia and the South China Sea, CII is familiar with the legal and ethical conflicts that exist when doing business abroad. Each country has its own laws, culture, and customs. Acts that are deemed illegal or unethical in the United States may very well be perfectly acceptable in other nations, and vice versa. This is where the ethical dilemma exists for CII in operating abroad, as these differences create more risk factors. Employment practices, human rights mandates, and environmental policies differ from country to country. CII cannot operate in the same way irrespective of where it is doing business.

This is where the importance of a code of ethics, corporate culture, and corporate social responsibility comes into play. The code of ethics sets forth the principles for employee ethical behavior which can include such principles as law adherence, product quality, workplace safety, and the like (Luizzi, 2010, p. 21). With each country having differing policies on employment practices, the environment, and human rights standards, CII's code of ethics must take these issues into account. This code of ethics is necessary in order to maintain the trust of stakeholders and to instill a sense of integrity in these stakeholders who will be scattered around the globe. Simply complying with local laws is not sufficient; the code of ethics must go above and beyond simply obeying laws, as operating with the law may still produce actions that would put the CII's reputation at risk ("Don't be Evil", n.d.). Corporate social responsibility takes the impact of doing business in a region on the society into account, requiring behavior be ethical while giving back to society (Baker, n.d.) In a country where environmental concerns are nonexistent, for CII to ignore what it knows to be damaging to the environment will not be perceived well in the eyes of stakeholders. By taking a Kantian ethical philosophy, CII should create its code of ethics based on duty, or what ought to be done. If the action is that which is done out of duty, then it is moral (Vlach, 2004). CII's duty is to its stakeholders and its code of ethics should reflect such a philosophy.

Corporate culture refers to the personality of the company; the way the employees within the company behave and operate. Corporate culture is influenced by the regional culture, therefore must be adapted based on location. As with the code of ethics CII must have a baseline that determines the general organizational culture but must adapt to different regions in which it operates (Bryce, 2006).

Because each country has different laws, policies, and customs, in order to operate CII's oil division in the Middle East it is recommended that all of these issues be taken into account. Being familiar with governing agencies that will affect international affairs and trade is important to the success of this expansion for CII. The benefits associated with this expansion must be maximized with the risks minimized. Knowing each country's culture and laws will aid in developing an appropriate company culture and a code of ethics that will be achievable. With a consistent companywide ethical baseline, local offices should adapt the code of ethics in order to comply with the customs and laws of the region. The ethical position should be clearly communicated to all key stakeholders in order to gain trust, improve relationships, and comply with the federal ethics training mandates for the FSGO. The code of ethics should reflect the core company values and drive the decisions that are made.

References

About the ILO. (2009, September 1). Retrieved October 7, 2009, from http://www.ilo.org/global/About_the_ILO/lang--en/index.htm

Ahiakpor, J. C. (1992, Sep. - Oct.). Multinational corporations in the third world: Predators or allies in economic development?. Religion & Liberty, vol. 2. Retrieved October 9, 2009, from http://www.acton.org/publications/randl/rl_article_59.php

Baker, M. (n.d.). Corporate social responsibility: What does it mean?. Retrieved October 9, 2009, from http://www.mallenbaker.net/csr/definition.php

Bryce, T. (2006, June 2). Understanding corporate culture. Retrieved October 8, 2009, from http://ezinearticles.com/?Understanding-Corporate-Culture&id=211379

Don't be evil: How can a global business preserve its code of ethics in a flat world? (n.d.). Retrieved October 8, 2009, from http://www.commerce.virginia.edu/ news_events/news%20releases/releases_2008/Jain.doc

INECE: Overview. (n.d.). Retrieved October 8, 2009, from http://www.inece.org/overview.html

Liuzzo, A. (2010). Essentials of Business Law. Boston: Career Education.

The World Bank: About us. (2008, October 14). Retrieved October 9, 2009, from http://web.worldbank.org/WBSITE/EXTERNAL/EXTABOUTUS/0,,pagePK:50004410~piPK:36602~theSitePK:29708,00.html

Vlach, M. J. (2004, November 20). Kantian ethics. Retrieved October 8, 2009, from http://www.theologicalstudies.org/articles/article/1527417/17142.htm

Welcome to the United Nations. (2009, October 8). Retrieved October 9, 2009, from http://www.un.org/en/index.shtml