In January of 2012, Azerbaijanis faced the real possibility of a future without Kit Kat bars, Nescafe, and Hot Pockets. After government officials demanded that it offer bribes to do business in the country, Nestlé pulled its products from the country’s shelves. Azerbaijan is a relatively small market, but the decision for a business to completely withdraw from any country isn’t easy. And this decision is one that more companies are going to face in coming years. People running “international companies” might have thought that bribing officials in a country that most people couldn’t find on a map was no big deal. But Nestlé pulled out because the nutrition and health giant saw that it was the only alternative for a “global organization.” What’s the difference?
1) Divisions Are No Longer Divided
An “international company” is a business with home offices in one country and divisions providing products and services in others – and manufacturing operations elsewhere. The profits flow back to the parent company while, by and large, any negative publicity over unethical business practices does not. Maintaining this kind of compartmentalization is nearly impossible today, opening the possibility of negative publicity that never would have existed before.
2) World Wide Watchdogs
Companies are operating in a whole new terrain largely because media has gone global. Today, the whole world is patrolled by 24-hour cable news networks and the Internet. Whether you run an international or global model, rest assured that the media following your company’s actions will be operating globally.
3) Global Ethics
It is increasingly impossible to hide ethical infractions in a tightly connected global economy. Wal-Mart and Gap are now under pressure in the world press to sign a building safety accord in Bangladesh and the world’s largest retailer is still a featured headline over the 2012 alleged bribing of local officials by Wal-Mart México. General Electric was brought to task in the Western media for allegations of bribing Iraqi officials between 2000-2003. Anywhere your company operates, your brand needs to be protected by ethical decision making.
4) Employees Bring Their Baggage Wherever They Go
A global leader recognizes that everything is interlinked, that there are no corporate firewalls, and that unethical business practices in one country will eventually lead to bad practices and press in others. When leaders are moved to different regions or units, they may bring their practices with them.
Google carefully orchestrates its culture by placing company veterans in every new office across the globe. By doing this, Google can ensure their desired culture is being spread to new places, not the other way around.
5) Everything Goes Viral
Last month, a car owner’s complaint about an inflated service quote and unnecessary repairs at a Hyundai dealership in Australia went viral – racking up almost 18,000 shares, 10,000 comments and more than 38,000 Likes in just 7 days.
6) Markets are Local, Brands are Global
Some countries operate with different ethical rules. Permitting can be expedited by putting cash in the right hands, construction can grind to a halt if you don’t. But, even in relatively large markets, global leaders must remember that the short-term regional profits could damage your global brand and ultimately devalue your entire company. In today’s global economy, you cannot afford to enter or stay in markets where you can’t compete ethically.
Although strong, creative companies can often find ways to succeed in ethically challenged countries and industries, when they find that there are no good options left, they should make the same decision as Nestlé. If your business can’t compete in a market without blowing out the ethical envelope, the business in that market is simply not worth it.
International companies are structured entirely differently from global organizations. Internationals are built on independent foundations around the world. Due to the lack of global connection at one time, if one foundation was damaged somewhere for some reason, it did not impact the others and could easily be hidden out of sight. To the contrary, global organizations today sit on one foundation and any block that is damaged anywhere in the world will impact the soundness of the whole structure. In this era, leaders need to stop imagining that they can continue successfully running international companies — and realize that they should be leading global organizations.
Published on Forbes, 30th May 2013