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What Are the Ethical Issues in Human Resource Management in

Multinational Corporations?
by Kathy Zheng, Demand Media
New ethical issues for human resources managers have emerged with the globalization of commerce and the rise of
increasingly large, complex multinational companies. In particular, the blending of languages, cultures and ways of
doing business create a minefield of challenges. Today, human resources managers must make difficult decisions in
order to bridge these gaps to create harmony within the company and to ensure the company is operating within
acceptable practices in each country in which it does business.
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Lack of Cultural Awareness
Multinational managers inevitably deal with miscommunication and lack of cultural awareness. They must prepare
their employees for appropriate conduct before sending them to their overseas destination. Training and cultural
classes help to enlighten employees about different customs and practices overseas. A lack of cultural awareness
could be shown by a lack of respect for the conservative or liberal nature of other cultures. HR managers should
assume responsibility for providing employees the right knowledge to successfully navigate cultural issues in
foreign countries.
Bribery
The Foreign Corrupt Practices Act prohibits bribery. However, this law cannot possibly cover all of the range of
payments that international businesses encounter. Things like facilitation payments may be required to operate in a
foreign country, and the U.S. government has ruled differently on multiple situations surrounding these types of
payments, which provides the company with a true ethical dilemma, particularly a human resources manager who
must aid an employee facing bribery attempts overseas. In addition, international companies face an environment of
pervasive corruption, according to a 2011 survey by Ernst and Young. In that survey, 39 percent of respondents said
corruption occurred frequently in their country. Some countries, such as Brazil and Indonesia, had very high rates of
reported corruption -- 84 percent and 64 percent, respectively. Human resources management must prepare its
employee traveling to these hot-bed countries on how to properly interact with the people and authorities, as well as
ensuring the employees remain safe and secure.
Related Reading: Ethical & Social Responsibilities of the Management of a Multinational Organization
Privacy
Privacy is a pervasive issue for many companies. In addition, privacy laws vary in different locations. The European
Union has much stricter privacy laws than the U.S. When the two sets of laws conflict, human resources managers
must make a decision which to follow. For example, a European Union company that operates in the United States
will have the choice to follow the EU's more restrictive policies or the more lax policies in the U.S. Some
corporations choose to enforce the home country standards due to their belief that it is a better operating model that
will produce better corporate results, as well as protection for their employees abroad.
Compensation
Another important issue to consider is the relative compensation levels for each country. Multinationals often have
offices in both developed and developing countries where the salaries are quite different. For example, an American
transferred to China might make 2 to 3 times their Chinese counterpart doing the same job. It is a bit unseemly to
have people working side by side earning so differently for jobs requiring the exact same skill set. In this case,
human resources management may face the ethical issue of whether to narrow the gap in compensation.

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