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Companies establishing operations outside of their home territory often find that the local culture holds sway in governing the day-to-day behavior of employees. While a globalized workforce and expanded markets offer significant opportunities, problems and conflicts can occur when acceptable business conduct varies among the company’s offices. Local business practices—from financial reporting to employee privacy to what constitutes proper business entertainment—can cause legal or ethical problems for the company.

Every multinational business faces a serious challenge: how to foster a unified ethical and compliant corporate culture while respecting the positive attributes and benefits it receives from each local culture in its operations.

The best way to manage this dilemma is first to “act globally” by establishing a unified corporate culture that endorses high standards of business conduct everywhere. In general, by applying common values to all operations, companies can more effectively embed ethics and compliance into their culture. John Stoxen, director of business conduct and compliance for 3M, explains his company’s strategy in operating in 65 countries, saying, “We feel it is important to have one set of business conduct principles throughout our company. We strive to build the same high standards and ethical culture everywhere 3M does business; we are not going to drop to the lowest common denominator.”

Setting high standards, though, doesn’t mean a rigid approach, which is why companies must also think about how to “engage locally.” Situations exist in which companies may need to accommodate local work habits or traditions. For example, attitudes about personal relationships among coworkers vary greatly in the Americas, Europe and Asia. A global policy against these relationships raises problems in some cultures where aspects of an individual’s personal life are considered to be private and outside of the company’s concern.

Many companies use an approach in which they distinguish between common global principles and varying local policies. Consider the issue of business gifts, for example. The company sets a principle to avoid giving inappropriate gifts that might unduly influence or appear to influence a relationship. In some countries, this principle translates into a total ban on gifts, while in other locations where business gifts are legal and customary, such as in Asia, it allows for gifts of modest value. This type of balancing between principles and policies can be extended to nearly every decision affecting business conduct.

The greatest opportunity to acknowledge and respect local differences comes in engaging employees to become part of the global culture. Disseminating the company’s values, achieving understanding and getting buy-in can only happen when companies appeal to each business unit in ways that are customized to its culture. Methods to actively engage each local workforce and business unit include:

Involve all regions in developing and delivering the message. To drive consistent behavior, the ethics and compliance office cannot work alone. Involving local business units and relevant functional areas is valuable to both shaping local policies that identify approved business conduct and delivering the message to each employee.

The goal is to make ethics and compliance not just a department within the company but an integrated element in each business operation. As Gary Giampetruzzi, senior corporate counsel and deputy compliance officer for Pfizer, the global pharmaceutical company, describes, “We seek to have our corporate compliance message reach every colleague, every day. To do that, the effort has to extend beyond the compliance office and the message has to come from multiple angles, including human resources, finance and audit, and from within the business units.”

Establish a local presence. Establishing a compliance presence in each location or a satellite office in every region serves to help keep the message in front of employees. A local office is also useful for ensuring that local risks are identified and culturally sensitive issues are called to the attention of those in the head office responsible for running the program globally. Having an ally in a distant office can often make local issues more understandable and help develop a more effective local response.

If having a local presence is not possible, it is important to at least make regular site visits from the central ethics and compliance office to help engage employees, develop organizational insight into the unique characteristics of the local environment and uncover first-hand the ethical risks that employees face in that office. You cannot function simply as “the people overseas” and be effective.

Educate all employees. Expected standards of behavior must reach all employees at all levels of the organization. Building ethical decision making and leadership into the daily conduct of all employees first requires executive-level involvement and oversight. But ethics and compliance is also everyone’s job. Any narrowing of the scope creates pockets of risk for the company. Managers in every territory need education and ongoing support to develop into ethical leaders, and the people they manage also need clear, effective education in making the right choices based on the values the company seeks to integrate into the culture.

Communicate in their language. A company’s ethics and compliance standards become meaningful only if every employee understands and follows them. For the global company, the challenge is ensuring messages are delivered to employees in the most effective way. Even if English is the language of commerce in the business, it is worth remembering that not every employee may speak or read it well enough to understand all communications clearly. This means that it is important to translate all communications—including courses, memos, emails, even transcripts of CEO speeches—into the employees’ first language.

Build culturally appropriate reporting systems. Under increased scrutiny, companies are now required to encourage employees to report non-compliant conduct they witness, using a resource such as an anonymous telephone helpline or a website. To encourage local usage, though, a company needs to tailor it to each location. This means making the helpline available during the working hours of that location, offering translators on the line, and writing the web site in the employees’ primary language.

The extent to which employees use these tools usually relates to the effectiveness of the company’s business conduct messaging. As John Stoxen of 3M explains, “Business conduct violations have a way of following headcount. If you are not receiving reports of suspected violations in an area of the world where your company has significant headcount, you have two problems — business conduct violations you don’t know about, and a problem with employees not reporting violations they observe. You need to ask what you can do to better to drive home your business conduct message in that area.”

Worldwide support is catching up.
Ultimately, each business must decide for itself when their global principles take priority over local business practices and work habits—and in what few circumstances a local policy may be allowed. The good news, however, is that increased globalization of business is creating more universally accepted standards of conduct. This trend will clearly facilitate the task of companies to instill their core values, expectations of conduct and relevant principles that serve to bolster their business goals and create a truly global ethical culture throughout their organizations.

All Culture Is Local

The history and traditions of each country shape its unique culture, which plays out in the language, attitudes, living habits and work styles of its people. The differences among countries require companies to recognize that “all culture is local” and so they must appeal to their workforces on a country-by-country basis. Issues that companies must account for include:

• Terminology and jargon may not translate. Companies must be attentive to the language they use in communications about ethics, compliance and culture. English terms such as “FAQs” and “wrap-up” that creep into memos, speeches or education content have no meaning in many languages, and can make translating policies difficult. As Peggy Shukur, general counsel for translation company Lionbridge, explains, “Communicating across different cultures and locations requires thoughtful planning, especially for U.S.-headquartered companies with non-U.S. operations. The essential message need not be altered, but the way it is communicated may need to be different.”

• Images, colors and icons convey different meanings in different parts of the world. These differences can influence the way in which companies educate employees about their culture. For example, the color red signifies happiness in China; in the U.S., red signifies danger. A red flag, a common icon used in the U.S. as a warning sign, does not have the same meaning in the rest of the world.

• Technology is not always compatible from country to country. Flash technology does not support languages that read right to left, such as Hebrew and Arabic. Many developing nations have limited access to broadband Internet connections. And the cell phone is sometimes the preferred communication device in European countries. Developing ethics communications must therefore consider these technical issues.

• Legal systems differ significantly among countries. Companies need to be sure employees fully understand any legal requirements they may face, and these can be complex in some countries. Proprietary information laws in Estonia, for example, involve four bodies of authorship law, 28 different industrial property laws and seven freedom of information laws. To address consumer product safety risk in Sweden, businesses must understand at least eight different laws.

• Determination of crime and punishments can vary enormously. Companies need to do legal research before entering any new territory to ascertain the various laws, criminal determinations and punishments that may apply to their workforces. For example, an individual violating bribery and corruption laws in China may face the death penalty.

• Local business practices may arise from traditions rather than law. Companies need to be sure that they fully understand the origin of local business practices. In India, for example, authorities wield broad power to approve or disapprove a company’s operating plans. Reaction to the Bhopal environmental contamination incident continues to affect their decisions, and they are willing to close facilities and put people out of work if necessary.

Adam Turteltaub is the corporate relations executive at LRN, a leading provider of governance, ethics and compliance management aplications and services to more than 250 organizations. www.lrn.com