Developing Corporate Codes of Ethics in Multinational Firms: Bhopal Revisited

Article excerpt

On the night of December 3rd, 1984, one of the most monumental industrial catastrophes in history took place at a chemical plant located in the heart of Bhopal, India. Around midnight, a leak in one of the tanks that stored toxic chemicals used to produce pesticides triggered a chemical reaction which resulted in a shroud of toxic gas that enveloped the entire city. Thousands of people were killed, orphaned and left homeless. Ironically, the factory's majority owner was a U.S. firm: Union Carbide.

Many questions have been raised about how Union Carbide's safety standards and codes of conduct could have averted this disaster. Would as many people have died if this accident occurred at Union Carbide's identical factory at Institute, West Virginia? Although we may never know the answer to this question, the purpose of this article is to provide an evaluation of how recognizing the local culture could have helped minimize the harm in the Bhopal incident. The Bhopal example is employed due to the historical significance of the tragedy and the potential for similar catastrophes in the future as more multinational firms set up manufacturing operations in foreign lands (Hartley, 1993).

Additionally, this article addresses the need for the establishment of a corporate code of ethics which should both influence and assist the decision making of expatriate managers in foreign subsidiaries. Although many multinational firms have developed ethical guidelines for expatriate managers, problems have consistently arisen due to cultural misunderstandings of what is perceived as unethical behavior (Donaldson, 1989; Dubinsky and Loken, 1989; Vogel, 1992). Organizations are desirous of more practical information on the interface of culture and ethics, rather than a summary of the fundamental ethical differences which may exist between two different cultures (DeGeorge, 1993; Rest, 1986). In addition, while the notion of the learning organization has received much attention, the emphasis on how firms can learn and adapt to diverse moral and ethical matters has received very little attention (Nonaka, 1994). More executives than ever before are beginning to discover the logical connection that exists between ethical performance and overall corporate performance (Boroughs, 1995; Donaldson, 1989). As a result, researchers continue to place more emphasis on such concepts as corporate social responsibility and corporate social performance (Fritzsche and Becker, 1984; Jones, 1996; Wood, 1991).

This article begins with a review of recent cross-cultural studies related to business ethics. A number of important factors surrounding a culture-based code of ethics are then presented. Next, the circumstances leading up to the Bhopal disaster are revisited. The article concludes with an exploration of the steps for developing ethics programs and a conceptual model which delineates culture-based ethical standards is then proposed. An evaluation of each of the steps of the derived framework, as well as a discussion of future research directions and managerial implications, are provided.


There has been a growing stream of cross-cultural studies which have attempted to interpret the relationship between culture and ethical decision making.(1) As more firms engage in international trade, the interest in this research area appears to be picking up speed. Results from empirical studies that have examined the effect of culture on ethics have consistently shown a strong relationship between these two variables (Robertson, 1993). An understanding of the recent research findings is important in the identification of how cultural differences can lead to misunderstandings of improper behavior and policies across borders.

In an early laboratory experiment that analyzed the ethical decision making of graduate business students, nationality was found to be related to ethical decision behavior (Hegarty and Sims, 1979). …