What is corporate governance and how does it relate to ethics? Consider how the moral nature of international business is always linked to the differences in political, legal, economic, and social systems between home and host countries and how operating abroad creates dilemmas for multi-national enterprises (MNEs) that can lead to charges of serious ethical failings and opportunities for misconduct.

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Corporate governance is a system of rules, practices, and processes for organizing and controlling a company. What makes this so complex is that several different types of stakeholders affect how a company is governed, including a board of directors, shareholders, workers, and company executives. Often their interests are not aligned. 

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Corporate governance is a system of rules, practices, and processes for organizing and controlling a company. What makes this so complex is that several different types of stakeholders affect how a company is governed, including a board of directors, shareholders, workers, and company executives. Often their interests are not aligned. 

The ethical issues that arise have in part to do with these competing interests. For example, executives want the highest possible salaries, but that is not compatible with reducing costs, something customers and shareholders want. Reducing costs might involve minimizing taxes or harming the environment, which is not in the public interest. Because multinational corporations may lack local loyalties, they often act in ways which do not account for their ethical obligations to their communities. 

Another issue is that what is considered ethical in one country is unethical in others. For example, in North America, bribery is illegal; in some other countries, it is impossible to get permits or conduct many types of business without paying bribes. Also, by outsourcing production to countries with fewer environmental regulations or weaker labor protections, companies can increase profits, albeit at the expense of harming the environment or employing child labor, which is ethically questionable.

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